Market Focus Shifts to Monetary Policy
As the tech sector regains its footing following the recent DeepSeek shock, attention has turned to monetary policy, with a series of rate decisions making headlines overnight. The U.S. Federal Reserve’s decision to hold rates steady was expected, but it was the dovish comments from Chair Jerome Powell that left traders uncertain about the timing of the next rate cut.
Mixed Signals from Central Banks
In contrast, Sweden’s Riksbank and the Bank of Canada both cut rates, but with differing signals. The Riksbank hinted that its current easing cycle might be over, while the Canadian central bank expressed uncertainty about further rate reductions in March due to potential inflationary risks from U.S. tariffs.
ECB Decision Looms Large
The European Central Bank (ECB) is now in the spotlight, with traders expecting rapid-fire cuts today, in March, and in July, followed by a possible December cut. However, the threat of tariffs from President Donald Trump looms large, casting uncertainty over the ECB’s decision-making process.
Tariff Threats Weigh on Markets
Trump’s promise of 25% levies on Canada and Mexico, as well as a 10% duty on China, remains a concern for markets. The White House has reiterated Trump’s commitment to these tariffs, despite a recent friendly phone call with Xi Jinping. Europe is also in Trump’s sights, with threats of punitive action if the bloc doesn’t increase its purchases of American oil and gas.
Asian Markets Mixed
With many Asian markets closed for the lunar New Year, European traders won’t get clear trading clues from the region. However, Tokyo recovered from early losses to trade in the green, while Sydney’s bourse closed at a record high. U.S. stock futures are also gaining following Wall Street’s weak close overnight.
Earnings Season Kicks Off
Megacap “Mag 7” earnings kicked off on Wednesday with mixed results. Microsoft beat quarterly revenue estimates, while Tesla’s fourth-quarter profit margin missed expectations. Meta forecast first-quarter revenue below market estimates. Apple reports after the closing bell today, and European stocks are set to start from a position of strength, following a record peak on Wednesday.
Key Developments to Watch
Today’s key developments that could influence markets include:
- ECB policy decision
- European earnings from ABB, Deutsche Bank, Hennes & Mauritz, Shell, and STMicroelectronics
- Apple earnings
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