Global Markets Cautious Ahead of Key U.S. Data as Geopolitical and Policy Risks Shape Sentiment

Index Update:  Investor sentiment remained cautious ahead of a data-heavy week featuring key U.S. employment and inflation reports alongside ongoing earnings releases. Concerns were further heightened by reports that Chinese regulators have advised domestic financial institutions to reduce exposure to U.S. Treasuries due to concentration and volatility risks. Technology stocks faced renewed selling pressure in premarket trade, with most megacaps lower, while Microsoft was a notable outperformer, posting modest gains.

Market Movers:  On Friday, the top gainers were SMX (Security Matters) Public Limited Company (+89.58%), followed by Pulse Biosciences, Inc (+51.57%). On the contrary, GrafTech International Ltd. (-46.21%), and Polaryx Therapeutics, Inc. (-44.31%) declined the most the same day.

Commodities Update:  WTI and Brent crude futures climbed on Monday, with WTI moving above $63.5 per barrel and Brent topping $68, as markets continued to price in geopolitical risk premiums. Optimism around U.S.–Iran negotiations was tempered by recent tensions that had raised concerns over stricter U.S. sanctions on Iranian oil and potential disruptions in the Strait of Hormuz. These geopolitical factors outweighed expectations of an oversupplied oil market driven by higher OPEC output and strong production from the U.S., Canada, and Brazil. Additional uncertainty stemmed from India’s oil import outlook, as its trade talks with the U.S. raised questions over potential curbs on Russian crude purchases. Gold and silver prices advanced on Monday, supported by a softer U.S. dollar and heightened investor focus on upcoming U.S. economic data. Gold climbed above $5,000 per ounce, its highest level in more than a week, as markets awaited key jobs and inflation reports that could shape expectations for Federal Reserve rate cuts, alongside continued central bank demand from China. Geopolitical developments, particularly ongoing U.S.–Iran talks, also remained in focus. Silver surged around 5% to near $82 per ounce, extending gains after a sharp rebound from a recent heavy selloff. The rally was driven by renewed buying interest, supportive political developments in Japan favoring fiscal expansion, and broader anticipation of U.S. macroeconomic data, while recent volatility was partly attributed to speculative activity.

Macro Updates:  The U.S. dollar weakened for a second straight session, with the dollar index slipping below 97.5 as investors awaited delayed U.S. jobs, retail sales, and inflation data for clues on the economic outlook and Federal Reserve policy. Improved risk sentiment, reflected in rebounds across technology stocks, precious metals, and cryptocurrencies, also weighed on the currency. Meanwhile, the dollar remained volatile against the yen following Japan’s election outcome, which raised expectations of expansionary fiscal policies.

Bonds Commentary:  The U.S. 10-year Treasury yield edged up to around 4.23% as investors positioned for a data-heavy week featuring key employment, inflation, and retail sales reports that could shape expectations for Federal Reserve policy. Treasury prices were further pressured by reports that Chinese regulators are encouraging domestic institutions to reduce exposure to U.S. debt, with China’s Treasury holdings falling to their lowest level since 2008. Meanwhile, Japanese government bond yields also moved higher following a decisive election victory that raised expectations of continued fiscal expansion.

Futures Update;  U.S. stock futures moved slightly higher on Monday as investors looked ahead to a busy week of key economic data and major corporate earnings. Focus is on the delayed January jobs report and CPI data for signals on labor market and inflation trends, while earnings from companies including Coca-Cola, Ford, McDonald’s, Robinhood and Coinbase are also in view. Markets rebounded late last week after early pressure, with the Dow posting solid weekly gains while the S&P 500 and Nasdaq ended modestly lower. Dow Jones futures were down 48 points, or 0.1%, S&P 500 futures declined 18 points, or 0.3%, while Nasdaq 100 futures fell 115 points, or 0.5%.

Following a sharp decline over the past few sessions, stocks experienced a significant rebound during Friday's trading. All major averages demonstrated notable movement, with the Dow closing above 50,000. The S&P 500 surged by 133.92 points, or 1.97%, finishing at 6,932.31. From a technical standpoint, the index showed a solid upward move during Friday’s session, as we previously mentioned. Moving forward, the index may enter a range-bound trading session today. The 14-day Relative Strength Index (RSI) remains near the midpoint, indicating indecision at current levels. Key support is identified around 6,870, a level that could prompt a rebound, while resistance is observed near 7,050.