Global Markets React to US Inflation Data Amid Holiday-Reduced Trading

Global stock markets experienced gains following subdued US inflation data, reinforcing expectations of potential Federal Reserve rate cuts. Trading volumes were reduced due to public holidays in the US and China.

Europe's Stoxx 600 index rose 0.3%, with banking shares rebounding from the previous week's decline. NatWest Group Plc climbed 4% after Citigroup Inc. raised its price target on the UK lender. Futures on the S&P 500 added 0.4%. German bunds and Treasury futures remained steady after US yields touched their lowest since December on Friday.

With the US observing Presidents' Day and mainland China's markets closed for Lunar New Year, trading was muted on Monday. However, the trajectory of US interest rates remains a focal point following Friday's slower-than-expected US inflation report, leading traders to fully price in a Federal Reserve cut in July and a strong chance of a move in June.

"The backdrop for equities is positive post CPI," said Andrea Gabellone, head of global equities at KBC Securities. He added that there could be "more dispersion ahead as sentiment around key AI-exposed sectors is still very critical."

Other strategists echoed this sentiment, emphasizing the need to distinguish between AI losers and winners. A JPMorgan Chase & Co. team led by Mislav Matejka urged caution on stocks at risk of AI-driven "cannibalization," including software, business services, and media companies.

Traders are now watching for ADP private payrolls numbers on Tuesday and the minutes from the Federal Reserve's January meeting on Wednesday for further economic insights.

Elsewhere, gold dipped below $5,000 an ounce as traders booked profits from the previous session's gains. Silver fell 1%. The dollar remained steady. Bitcoin traded little changed around $68,750 after posting its fourth consecutive weekly loss, with the cryptocurrency struggling to find clear direction as a weekend rally fizzled.

In corporate news, NatWest rose the most since October, as Citi analyst Andrew Coombs raised his price target on the UK bank to a Street-high and increased his estimates for pretax profit and earnings-per-share to account for the acquisition of wealth manager Evelyn Partners and higher net interest income. Orsted A/S advanced as much as 4% after an upgrade from analysts at Kepler Cheuvreux, who were positive on the wind turbines operator's outlook despite ongoing uncertainty for the industry in the US. Warner Bros Discovery Inc. is considering reopening sale talks with rival Hollywood studio Paramount Skydance Corp. after receiving its hostile suitor's most recent amended offer, according to sources. Volkswagen plans to cut costs by 20% by the end of 2028, as reported by Manager Magazin. A group led by Macquarie Asset Management will buy Qube Holdings Ltd. in a deal worth around A$11.7 billion ($8.3 billion).

Key market movements include:

• Stocks: S&P 500 futures rose 0.3% as of 6:12 a.m. New York time; Nasdaq 100 futures rose 0.2%; Futures on the Dow Jones Industrial Average rose 0.4%; The Stoxx Europe 600 rose 0.2%; The MSCI World Index was little changed.

• Currencies: The Bloomberg Dollar Spot Index rose 0.1%; The euro was little changed at $1.1863; The British pound was little changed at $1.3646; The Japanese yen fell 0.5% to 153.52 per dollar.

• Cryptocurrencies: Bitcoin fell 0.5% to $68,463.04; Ether rose 0.4% to $1,965.81.

• Bonds: The yield on 10-year Treasuries was little changed at 4.05%; Germany's 10-year yield was little changed at 2.76%; Britain's 10-year yield was little changed at 4.42%.

• Commodities: West Texas Intermediate crude rose 0.2% to $63.02 a barrel; Spot gold fell 0.8% to $5,001.06 an ounce.