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European Equity Futures Continue to Rise on Optimism over Fed Rate Cuts and S&P 500 Record High

(Bloomberg) — European equity futures edged up after the S&P 500 closed at a new record high Friday amid optimism over eventual Federal Reserve interest-rate cuts. Trading levels in Asia were muted with a swath of markets shut for Lunar New Year holidays.

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Contracts for the Euro Stoxx 50 index show the benchmark is poised to extend its advance after finishing Friday with a third weekly gain. The S&P 500 closed above 5,000 for the first time driven by a renewed rally in big tech companies.

Equities in Australia, New Zealand, India and the Philippines drifted lower amid a lack of leads in the region. Markets including Japan, China, Hong Kong, Singapore, Taiwan and South Korea were all shut for holidays.

US futures were little changed with investors preparing for US inflation numbers due Tuesday that will help identify the path forward for the Fed.

The yen held near a two-month low reached on Friday following comments from central bankers that the Bank of Japan will take its time raising rates. JapanÔÇÖs currency has weakened against all its Group-of-10 peers this year.

Australian and New Zealand bonds fell, roughly mirroring declines in Treasuries on Friday. There was no trading of cash Treasuries in Asia due to the holiday in Japan.

Bitcoin was little changed after earlier edging up toward $49,000 ÔÇö a level last seen in mid-January when a number of US spot exchange-traded funds began trading.

The annual US inflation rate is forecast to have dropped to 2.9% in January from 3.4% the prior month, according to consensus estimates of economists surveyed by Bloomberg. That would be the first reading below 3% since March 2021.

ÔÇ£High inflation rarely has been tamed without precipitating a recession,ÔÇØ Ed Yardeni, president of Yardeni Research Inc., wrote in a research note. ÔÇ£The Fed has steered inflation down toward its 2% target, while allowing the US economy to fly, avoiding a hard landing.ÔÇØ

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The S&P 500 rose 0.6% on Friday to set a fresh record, while the Nasdaq 100 jumped 1%. The gains were helped by technology stocks and positive fourth-quarter earnings. Four in five of the companies that have reported their results so far have exceeded expectations, brightening the outlook for corporate profits.

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The advance for US stocks came even as traders pushed back expectations for Fed policy easing after relatively hawkish commentary from central bankers and economic data showing no immediate need to trim interest rates.

Swaps market pricing shows investors anticipate the chance of a Fed cut in March at 15%, down from 65% a month ago. Traders now foresee four 25-basis-point rate cuts in 2024, down from seven forecast at the end of last year.

In commodities, oil prices fell following last weekÔÇÖs advance IranÔÇÖs foreign minister said the war in Gaza may be moving closer to a diplomatic solution.

In Asia, data set for release Monday include Indian inflation and industrial output reports.

Key events this week:

• India CPI, Monday

• Minneapolis Fed President Neel Kashkari, Fed Governor Michelle Bowman, Fed President Tom Barkin speak, Monday

• ECB executive board member Piero Cipollone, chief economist Philip Lane speak, Monday

• US CPI, Tuesday

• UK unemployment, Tuesday

• Japan producer prices, Tuesday

• UK inflation, Wednesday

• Eurozone GDP, industrial production, Wednesday

• Indonesia presidential election, Wednesday

• Bank of England Governor Andrew Bailey speaks, Wednesday

• ECB governing council member Boris Vujcic and vice president Luis de Guindos speak

• Chicago Fed President Austan Goolsbee speaks, Wednesday

• Australia jobs, Thursday

• Japan GDP, Thursday

• UK GDP, Thursday

• US initial jobless claims, retail sales, Thursday

• Philippine central bank meeting on interest rates, Thursday

• ECB President Christine Lagarde speaks, Thursday

• Fed Governor Christopher Waller speaks, Thursday

• Bank of England policy makers Catherine Mann, Megan Green speak, Thursday

• US housing starts, producer prices, Friday

• San Francisco Fed President Mary Daly, Fed Vice Chair for Supervision Michael Barr speak, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 3:32 p.m. Tokyo time

• Nasdaq 100 futures were little changed

• Euro Stoxx 50 futures rose 0.3%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0793

• The Japanese yen was little changed at 149.20 per dollar

• The offshore yuan was little changed at 7.2217 per dollar

Cryptocurrencies

• Bitcoin was little changed at $48,138.01

• Ether fell 0.2% to $2,499.03

Bonds

Commodities

This story was produced with the assistance of Bloomberg Automation.

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