European stock indexes edged higher on Monday, while Wall Street futures struggled to make gains as investors weighed up recession fears with hopes that inflation could be past its peak.
Liquidity was thin during Asian trading hours as markets in China, Hong Kong, Singapore, Malaysia, South Korea and Taiwan were closed for the Lunar New Year holiday.
At 1234 GMT, the MSCI World Equity index was up 0.2% on the day, holding just below last week’s highs (.MIWD00000PUS).
Wall Street rallied at the end of last week, after a jump in Netflix and Alphabet shares. Ahead of another week of earnings, U.S. stock index futures were little changed. Nasdaq e-minis were up 0.1% and S&P 500 e-minis were flat .
Signs of inflation softening, falls in commodity prices and the easing of China’s COVID-19 restrictions have raised hopes so far this year that a global economic downturn may not be as severe as feared.
Money markets are pricing in a 98% chance that the Fed will raise rates by 25 basis points next month, and have steadily lowered the likely peak for rates to 4.75% to 5.0%, from the current level of 4.25% to 4.50%. .
“The market’s still quite buoyant at the moment,” said Peter Chatwell, head of global macro strategies trading at Mizuho, who said markets were being driven by the idea that U.S. inflation has peaked.
“On the surface, it looks like inflation has been dealt with and the most likely path ahead is lower. I’m still cautious about the inflation outlook for the second half of the year,” he said.
Investors are waiting for euro zone and U.S. flash PMI data on Tuesday, which are expected to show less severe economic contractions than the previous month, according to analysts polled by Reuters. The data is forecast to show more improvement in Europe than in the United States.
The U.S. dollar index was steady at 101.96 . The euro was up 0.2% at $1.0875 , having hit a nine-month high of $1.0927 earlier in the session. Analysts say the euro’s strength has been helped by an easing of recession fears amid a fall in natural gas prices, as well as hawkish comments from European Central Bank governing council member Klaas Knot in an interview on Sunday.
The British pound was down 0.2% at $1.237 and the Australian dollar, seen as a liquid proxy for risk appetite, was up 0.4% at $0.69985 .
The dollar edged higher against the yen, up 0.5% at 130.165 , having fluctuated last week after the Bank of Japan defied market pressure to ease its ultra-loose monetary policy.
Euro zone bonds were little changed, with the benchmark 10-year German yield at 2.181% .
Oil prices edged higher, with Brent crude up 0.9% and U.S. crude up 0.8% .