International markets start the week mixed as investors catch breath after big rally
European stocks drifted lower Monday as investors paused for breath after a sizable rally last week. Despite the move lower, there are few signs of the turmoil that gripped stock markets earlier this month.
U.S. stock markets closed for Presidents Day while those in Hong Kong and China closed for the Lunar New Year.
In Europe, Germany’s DAX was down 0.3% at 12,412 while the FTSE 100 index of leading British shares fell 0.3% to 7,276. The CAC 40 in France was 0.2% lower at 5,269.
Earlier, Asian stocks performed strongly as they caught up with Friday’s further advance, particularly on Wall Street.
In Japan, the Nikkei 225 jumped 2% to 22,149.21. The Tokyo benchmark ended the day just 2.7% below where it started 2018, having recouped most of its losses during the recent global rout. South Korea’s Kospi advanced 0.9% to 2,442.82. Australia’s S&P/ASX 200 rose 0.6% to 5,941.60.
There were real concerns this month that global stock markets were poised for a sustained period of weakness. However, sentiment has recovered over the last week or so, with many traders adjusting to the altered economic environment.
“So far, global equity markets seem to be adjusting to the prospect of higher inflation, presumably on the basis that increases in corporate pricing power will be positive for earnings rather than dent profit margins and result in a stagflationary economy,” said Neil MacKinnon, global macro strategist at VTB Capital.
Benchmark U.S. crude rose 46 cents to $62.01 a barrel in electronic trading on the New York Mercantile Exchange while Brent crude, used to price international oils, was up 25 cents at $65.09 a barrel in London.
The euro was down 0.1% at $1.2397 while the dollar rose 0.2% to 106.60 yen.
Futures in Japan, Australia and South Korea indicate a lower opening Tuesday on the Asian market given the softness in European stocks Monday.
But investors big focus now turns to the the U.S. Treasury, which opens its auction floodgates this week, beginning with $151 billion of short-term bills Tuesday. With little in the way of significant economic data on the schedule, the sales will provide the clearest gauge yet of how steeply bond yields may rise in the world’s largest economy.
Bloomberg contributed to this report.
