Asian markets, led by Japan, experienced a robust rally, primarily fueled by heightened enthusiasm in the technology sector, particularly in artificial intelligence (AI). The Nikkei achieved a fresh 34-year peak, marking an 8.3% increase in January. This surge was propelled by strong performances in chip stocks, notably following an optimistic profit outlook from Taiwan Semiconductor Manufacturing.
Chipmakers such as Nvidia and Advanced Micro Devices reaped the benefits of this AI-driven rally. Meanwhile, global investors are gearing up for a week filled with significant events, including central bank meetings, economic data releases, and corporate earnings reports. Eyes are on results from prominent companies such as Intel, IBM, Tesla, Netflix, and Lockheed Martin. In the US, S&P 500 and Nasdaq futures showed marginal gains after reaching record highs last week.
While MSCI's broadest index of Asia-Pacific shares outside Japan rebounded by 0.3%, recovering from the previous week's dip influenced by weakness in China's markets, concerns about China's economic stability persist. China experienced a five-year low, raising speculation about potential support from state funds for stocks. Despite these concerns, Beijing seems reluctant to implement aggressive stimulus measures.
The Bank of Japan, meeting on Tuesday, is expected to maintain its super-easy monetary policies despite a second consecutive month of slowing consumer prices. Analysts anticipate a cautious stance from the central bank, with a wait-and-see approach until the outcomes of spring wage rounds are known before considering any tightening measures.
On the global front, the European Central Bank (ECB) is set to meet on Thursday, with expectations of maintaining its current stance despite recent hawkish commentary from top officials. While a March rate cut seems plausible, the ECB's resistance increases the likelihood of a cut in June. Futures suggest a 76% chance of a first cut in May, with 40 basis points of easing priced in by June.
Central banks in Canada and Norway are also scheduled to meet this week, with no anticipated changes to interest rates. In the United States, market expectations for a March cut from the Federal Reserve have decreased to 49%, influenced by recent hawkish rhetoric. Attention now turns to US economic growth and core inflation data, shaping prospects for early easing.
Last week witnessed a notable shift in global financial markets, with 10-year Treasury yields rising nearly 20 basis points to 4.13%, strengthening the dollar. The euro held steady at $1.0893. Gold lost appeal at $2,028 an ounce due to rising yields, while concerns about global demand offset tensions in the Middle East, reflecting ongoing uncertainties in the energy market as Brent crude dipped to $78.33 a barrel and US crude for January eased to $73.16 per barrel.
