The stocks and bonds posted a small move amid thin trade volumes due to holidays in the US and Asia, and mild US inflation data. AI disruption fears would continue to haunt the stocks, said by Bloomberg strategists
Bloomberg- The stocks and bonds recorded small moves amid holiday-thinned trade and benign US inflation data released on Friday, reinforcing the expectations that the Federal Reserve will reduce interest rates this year.
Europe’s Stoxx 600 index increased by 0.1% while Futures on the S&P 500 were flat. NatWest Group Plc also increased by 4.8%. German Treasury Futures and Bunds remained steady after the US yields had lowered since December on Friday. Futures on the tech-heavy NASDAQ 100 also dropped by 0.2%.
The trading volume was primarily thin due to the national holiday on President’s Day in the US, and the majority of Asian markets closed for the Lunar New Year Holidays. Despite this, the path of US interest rates remains the center of attention after the release of softer inflation data.
Andrea Gabellone, head of global equities at KBC Securities, stated that the backdrop for equities is positive post CPI. Moreover, the dispersion can be more significant as sentiments regarding AI-exposed sectors are still very crucial.
These sentiments are also reflected by other strategists striving to differentiate between AI winners and losers.
Mislav Matejka, leading the JPMorgan Chase & Co team, argued that stocks are facing the risks of AI-powered cannibalization, including business service, software, and media companies.
In response to these risks, the firms are developing tools to take advantage of this divergence. Goldman Sachs Group Inc has introduced a new basket of software stocks that will benefit from AI adoption, shorting the companies whose workflow can be replaced.
As AI disruption continues to ripple through markets, investor confidence will largely depend on earnings strength in the US.
Nataliia Lipikhina, head of EMEA equity strategy at JP Morgan, told Bloomberg TV that the companies are showing 13% growth in the current earnings season, and this is why they are still positive about S&P.
Later this week, the minutes from the Fed’s January meetings and ADP private payrolls will be the center of attention for traders.
Read: Shares Fall in Japan amid the closure of Asian markets for the Lunar New Year Holiday
According to Bloomberg strategists, the continuing uncertainty around AI impact may cause the stock markets around the world, especially big tech companies, to fall. However, the bonds could rise as investors consider them safer. As a result of an increase in bond demand, the bond prices will rise.
In another dealing, Gold dropped below $5,000 per ounce as traders took profit from a gain in the previous session.
The dollar kept steady while Bitcoin fell by 1.5% to $68,505 after recording its fourth consecutive weekly loss. On the other hand, Ether increased by 1.6% to $1,989.27, indicating the struggle of cryptocurrency in finding a clear direction amid the fizzled weekend rally.
