European markets started the week with some declines, while Asian markets had a mixed opening on Monday. In the U.S., the markets are closed for Martin Luther King Day, which is a holiday.
France’s CAC 40 went down by 0.1% to 7,454.74, Germany’s DAX slipped 0.1% to 16,688.90, and Britain’s FTSE 100 lost 0.2% to 7,619.80.
Looking ahead, the S&P 500’s future increased by 0.1%, and the future for the Dow Jones Industrial Average remained almost unchanged.
In China, the central bank decided to keep the one-year policy loan interest rate at 2.5% on Monday and injected funds into the financial system.
This surprised market observers because it went against the expected trend of lowering borrowing costs to boost the economy.
According to a research by ANZ’s Zhaopeng Xing and Raymond Yeung, the “policy focus has shifted to the effectiveness of monetary policy. Today’s hold means the chance of an RRR (reserve ratio requirement) cut in February is higher.”
The stock market in Hong Kong went down by 0.2% to 16,216.33, while the Shanghai Composite index increased by 0.2% to 2,886.29.
Baidu, a search engine provider, saw a significant drop of 11.5% following a report claiming its Ernie AI platform was connected to Chinese military research on artificial intelligence. Baidu responded, stating it has no connection with the mentioned academic institution.
In Tokyo, the Nikkei 225 briefly crossed the 36,000 mark for the first time in 34 years on Monday but closed a bit lower at 35,901.79, showing a 0.9% gain. The Kospi in South Korea remained nearly unchanged at 2,525.99.
Lai Ching-te, the ruling-party candidate, won the presidential election in Taiwan on Saturday.
This outcome will impact the relationship between the self-ruled democracy and China over the next four years. The Democratic Progressive Party, to which Lai belongs, consistently rejects China’s claim of sovereignty over Taiwan.
On Friday, the S&P 500 went up by 0.1%, but the Dow Jones Industrial Average fell by 0.3% due to a significant loss for UnitedHealth Group after its results. The Nasdaq stayed mostly the same, rising by less than 0.1%.
Stocks have been steadily approaching record highs for months, bringing the S&P 500 within 0.3% of its all-time peak. This is driven by optimism that inflation is slowing down enough for the Federal Reserve to reduce interest rates multiple times this year.
Expectations of rate cuts have caused Treasury yields to drop in the bond market. They decreased even more after a report showed that inflation at the U.S. wholesale level was weaker last month than economists had predicted.
This data has strengthened the belief that rate cuts are likely, especially after a previous report indicated that inflation at the consumer level was higher than expected.
The yield on the 10-year Treasury decreased to 3.94% from nearly 4% just before the report was released. In October, it was above 5%, reaching its highest level since 2007. Lower rates and yields relieve pressure on the economy and financial system while increasing prices for investments.
In other market movements, a barrel of benchmark U.S. crude oil lost 33 cents, falling to $72.35. Brent crude, the international standard, dropped 30 cents to $77.99 per barrel.
The U.S. dollar was at 145.50 Japanese yen, up from 144.92, while the euro rose to $1.0955 from $1.0950.
Comments are closed.