Stocks experienced a slight decline as uncertainty surrounding potential Federal Reserve rate cuts weighed on investor sentiment. The Stoxx 600 index in Europe dropped by 0.3%, with automotive and mining sectors particularly affected, despite China’s recent efforts to stabilize its markets. Notable individual stock movements included defense firm Thales SA, which saw a surge following better-than-expected results, and Spirent Communications Plc, which soared after a buyout agreement by Viavi Solutions Inc.
In the U.S., Nasdaq 100 futures fell by 0.7%, following a weaker close on Monday. Pre-market trading showed chipmaker Advanced Micro Devices Inc. slipping by over 2%, facing obstacles in its AI chip sales to China. Apple Inc. also saw a decline after reports revealed a significant drop in iPhone sales in China.
Attention now turns to Fed Chair Jerome Powell’s testimony before Congress later in the week. Powell is expected to reiterate the Fed’s cautious approach to rate cuts, especially after Atlanta Fed President Raphael Bostic’s remarks suggesting a potential rate cut in the third quarter followed by a pause. Market expectations for rate cuts have shifted, with data suggesting a delay until July and a reduction in the number of expected cuts for the year.
Kenneth Broux, a strategist at Societe Generale, noted the influence of economic data on the Fed’s decision-making, suggesting a potential wavering on the previously anticipated three rate cuts.
In bond markets, Treasury yields retreated after an increase on Monday, driven by uncertainty surrounding Powell’s testimony. Elsewhere, Hong Kong and mainland Chinese equities showed mixed performance following announcements from China’s National People’s Congress regarding economic targets and stimulus measures.
Looking ahead, key events this week include various economic data releases, Fed Chair Powell’s testimonies, and President Joe Biden’s State of the Union address, which are expected to provide further insights into the economic landscape and market direction.
