Stock markets across Asia and Europe are on the rise Monday morning, buoyed by the continuing rally in technology shares. Investors now look ahead to several potential market-moving events this week, including congressional testimony from Federal Reserve Chair Jerome Powell and the start of China’s annual National People’s Congress.
The Focus Turns to Powell’s Remarks and US Jobs Data
After notching its 15th record close of 2023 on Friday, Wall Street appears poised to extend its winning streak when trading opens later today. The S&P 500 and tech-heavy Nasdaq 100 both posted solid gains to finish last week, fueled by optimism around the tech sector.
All eyes will be on Fed Chief Powell when he testifies before Congress on Wednesday and Thursday. Markets expect him to reinforce the central bank’s patient approach to further interest rate hikes while emphasizing that policymakers are in no hurry to start cutting rates. This messaging would likely be welcomed by investors, though any surprisingly aggressive signals from Powell could lead to a pullback in stocks.
The other major event on tap is Friday’s U.S. jobs report for February. Economists predict employers added around 175,000 jobs last month, down from the 517,000 gain in January. The unemployment rate is expected to tick down to 3.6%. A stronger-than-expected reading would likely strengthen the case for the Fed to maintain its hawkish stance.
Eurozone Services Data Also on Radar
Across the Atlantic, traders will be monitoring the eurozone’s February services PMI data due out Tuesday. Analysts forecast the index will rise to 52.8 from 50.8 the previous month, reflecting improved business activity and consumer demand.
On Thursday, the European Central Bank is widely projected to deliver another 0.5 percentage point interest rate increase as it remains focused on fighting high inflation. ECB President Christine Lagarde will likely stress officials’ resolve to stick with a restrictive policy despite growing concerns over a potential recession in Europe.
Chinese Stocks Eye Policy Support at National Congress
In Asia, China’s major stock indexes seesawed Monday ahead of the kickoff of the country’s biggest political event of the year. The National People’s Congress starting Tuesday is expected to unveil new economic initiatives aimed at shoring up growth amid global headwinds. Investors are optimistic the government will introduce additional stimulus and market-friendly measures during the gathering.
Most healthcare shares in China rose Monday on anticipation of more medical and pharmaceutical policy support coming out of the congress. Analysts say Beijing will likely set a GDP growth target around 5% for 2023, reflecting both external challenges and the government’s intention to focus more on domestic demand and consumption.
Japanese Shares Hit Milestone as Yen Remains Weak
Japan’s Nikkei 225 Index crossed above the 40,000 level for the first time ever early Monday as the yen’s weakness fueled gains for exporters and manufacturing firms. Analysts say the psychological 40K mark could present some near-term resistance, but structural trends and currency dynamics continue to favor Japanese equities.
The U.S. dollar is currently trading near 152 Japanese yen, boosting profits for export-oriented companies when they repatriate overseas earnings. The Bank of Japan’s unwavering dovish monetary policy in contrast to tightening by the Fed and other central banks has contributed to the yen’s steep declines over the past year.
Oil Holds Near $80 After OPEC+ Rolls Over Output Cuts
Crude prices are hovering around $80 per barrel, coming off the year’s high above $82 reached last week. The OPEC+ group agreed Sunday to stick with existing production cuts through June, quelling concerns about a potential supply glut emerging. Energy traders will keep monitoring the group’s discipline in actually implementing the reductions.
Continued releases from strategic petroleum reserves by the U.S. and allies as well as potential ramp-ups by some OPEC members remain wildcards for the oil market outlook this year. But for now, the supply backdrop appears supportive for prices holding at elevated levels in the $70 to $80 range.
Bitcoin Pushes Toward $67K on Improving Sentiment
In the crypto sphere, Bitcoin climbed back above $63,000 Monday en route to retesting November’s all-time high around $69,000. The recent rally reflects improving sentiment amid stability in broader financial markets and optimism crypto has entered a new bull phase.
Other factors helping boost Bitcoin and altcoins higher include increased institutional adoption, blockchain network upgrades, and more predictable regulatory frameworks taking shape. While risks remain ever-present in such a nascent asset class, thecrypto spring has sprung with gusto so far in 2023.
The Long and Short of the Markets this Week
With stocks demonstrating resilience so far this year amid a still murky economic picture, the path of least resistance seems higher as long as corporate profits hold up reasonably well. Earnings from Nvidia, Target and other U.S. retailers this week may provide the next glimpse into how consumers are faring.
While volatility will inevitably strike at some point, traders for now seem content to keep buying each dip across equities, bonds, crypto and other asset classes. But with geopolitical tensions, inflation stickiness and central bank policy uncertainty still swirling, it pays to keep one eye on downside risks.
