Global markets rally on optimism for Fed rate cut, tech stocks rebound, and Asian economies show signs of growth

European shares saw an uptick following the holiday break, mirroring positive movements in Asia and on Wall Street. Investors are optimistic about a potential interest rate cut by the Federal Reserve, possibly in March. The Stoxx Europe 600 rose by 0.3% in early trading, with technology stocks leading the gains. Prosus NV rebounded, recovering from a slump triggered by a Tencent Holdings Ltd. selloff. Mining stocks advanced, supported by high iron ore prices, with Anglo American Plc up more than 2% and Glencore Plc rising 1.8%.

However, container shipping firms faced declines after AP Moller-Maersk AS announced plans to resume shipping through the Red Sea, leading to a drop in stock prices. The disruption caused by attacks on Red Sea container traffic had initially boosted expectations of price increases. Maersk saw a decline of up to 5%, and Hapag-Lloyd AG slumped by 4.7%.

In the US, futures remained nearly flat after the S&P 500 closed just 0.5% below its previous record high. The 10-year Treasury yield fell three basis points, reflecting market expectations of an aggressive path of Fed easing in 2024. Bond yields in Europe also decreased, and the dollar remained stable against major currencies.

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Analysts express optimism about the S&P 500 reaching a new high, but some caution that market optimism may be overstretched. While the Fed is expected to cut rates, the anticipated speed of the rate cut may be too aggressive. Australian stocks, represented by the S&P/ASX 200 index, reached their highest level since April 2022, driven by gains in the mining sector. Mainland China equities rebounded on the back of accelerated growth in industrial profits.

Japan‘s Nikkei 225 index gained over 1%, approaching its previous high in July. The Bank of Japan discussed the potential timing of ending its negative rate policy, with several members indicating no rush to make the move. The yen weakened, and Japanese government bond yields fell.

In Hong Kong, major tech stocks recovered partially from a recent $80 billion rout after authorities signaled a willingness to ease new gaming restrictions. Tencent climbed by up to 6.2%, and NetEase, a smaller rival, jumped more than 14%.

US stocks have posted a 4.5% gain this month, bringing the year-to-date increase to 24%. While US and Australian indexes are nearing record highs, MSCI’s all-country index remains 4.5% below its November 2021 record. The MSCI Asia-Pacific Index is still 25% below its February 2021 high, making Asia a lagging region.

Oil prices reversed gains attributed to concerns about Red Sea shipping traffic, while gold prices slipped. Bitcoin experienced a slight increase after a retreat, as traders assessed potential reactions in crypto markets to the approval of the first US exchange-traded funds investing directly in the token by regulators.