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Asian Shares Mixed as US Futures Edge Lower

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Asian shares had a mixed start to the week, with most regional markets closed for holidays. U.S. futures, on the other hand, edged lower after the S&P 500 closed above 5,000 last week.

Market Updates

  • Australia’s S&P/ASX 200 slipped 0.3% to 7,621.10, while the Sensex in India edged 0.1% higher, reaching 71,647.74.
  • Thailand’s SET saw a slight increase of 0.1%, and Jakarta’s benchmark gained 0.6% ahead of an upcoming election on Wednesday.
  • Mainland Chinese markets remained closed for the Lunar New Year, resulting in a lack of market-moving news. Tokyo’s markets were also closed for a one-day holiday.

Upcoming Events

  • The United States is set to provide an important update on consumer inflation expectations later this week.
  • Japan will announce its GDP growth for the last quarter of 2023 on Thursday.

U.S. Inflation and Monetary Policy

According to Stephen Innes of SPI Asset Management, the U.S. price data may not significantly impact monetary policy. However, there is good news as inflation likely decreased at the beginning of the year, leading to expectations that the Federal Reserve may consider interest rate cuts in the coming months.

Wall Street’s Performance

On Friday, the S&P 500 rose 0.6%, closing above 5,000 for the first time at 5,026.61. This marked the index’s 10th record in less than a month, continuing its winning streak that began in late October.

The Nasdaq composite also had a strong performance, jumping 1.2% and coming within 0.4% of its all-time high set in 2021. It closed at 15,990.66.

The Dow Jones Industrial Average, however, slipped 0.1% to 38,749 after setting a record the day before.

Wall Street’s recent rally has been fueled by hopes of cooling inflation, which could lead the Federal Reserve to cut interest rates and relieve some pressure.

Big Tech Stocks Drive Market Surge

Big Tech stocks continued to dominate the market’s performance on Friday, sustaining a trend that has lasted for over a year. A significant contributing factor to this sustained growth is the excitement surrounding artificial intelligence technology. Notably, Nvidia, Microsoft, and Amazon were the primary forces behind the surge in the S&P 500 index, with each company experiencing a rise of at least 1.6%.

Cloudflare also experienced a significant boost after reporting stronger-than-expected profits for the last quarter. Despite an overall challenging economic environment, the cloud-services company soared by 19.5%. Additionally, Cloudflare announced that it had secured its largest new customer and largest renewal ever.

During this reporting season, most of the big companies in the S&P 500 have outperformed expectations, fueling optimism on Wall Street. However, some contrarians argue that this optimism may have driven stock prices to unjustifiably high levels.

Bank of America’s contrarian measure, which assesses fear and greed in the market, suggests that investor sentiment is leaning more towards “sell” rather than “buy” due to the rapid influx of traders into riskier investments. Although this measure has not reached convincing levels, it is something to watch closely. Interestingly, it signaled a buying opportunity in October when fear was prevalent.

In other news, U.S. benchmark crude oil experienced a slight decline of 38 cents to reach $76.46 per barrel in electronic trading on the New York Mercantile Exchange. However, it gained 62 cents on Friday. Likewise, Brent crude, the international standard, lost 37 cents to settle at $81.82 per barrel.

Furthermore, the U.S. dollar weakened slightly against the Japanese yen, falling to 149.24 yen from 149.28 yen. Conversely, the euro strengthened against the dollar, rising to $1.0792 from $1.0784.

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