The European Stoxx 600 index strengthened slightly, while the S&P 500 and Nasdaq 100 futures traded flat, trying to build on Friday's rally after Chinese leaders set a lower-than-expected economic growth target that could protect against the rollout of large-scale stimulus from China. Everyone feared was due to the risk of rising global inflation. On the other hand, this has hit commodity prices and put pressure on mainland Chinese stocks.
Meanwhile, the 10-year US Treasury bond yield fell below the psychologically important 4% level to about 3.93%. This also helped the S&P 500 index break its three-week losing streak, while the Nasdaq 100 had its best day since early February. Eurozone bonds also strengthened as investors trimmed expectations for peak interest rates in the bloc.
Investors are waiting for Fed Chairman Jerome Powell's speech to the Senate and House committees. His statements are likely to echo the recent hawkish comments made by other Fed officials. Nevertheless, current market prices suggest an interest rate hike to 5.4%. A 25 basis point rate hike is fully accounted for at the March 21-22 Fed meeting but there is a fairly high probability of a 50 basis point hike.
Notably, the monthly payroll data, due out Friday at the end of the week, may be more subdued than the previous month, which will help calm some Fed members and allay their fears.
Meanwhile, iron ore, crude oil, and copper prices continue to decline. The commodities index is down as much as 1%. The commodities-sensitive Australian and New Zealand dollars have lost ground.
Bitcoin and Ethereum are showing no signs of life after the sharp collapse associated with miners. The future direction of trading instruments depends on Powell and the appetite for risk, which can only increase after the speech. Many are predicting a bullish March this year, so if Powell says nothing new, we can count on that scenario.
As for the S&P 500 index, the demand for risky assets remains. The index may continue to grow if bulls manage to get above $4,064 today, reaching $4,091. Bulls also need to control $4,116, This may cancel the bear market. After that, we can expect a more confident rush to $4,150. If the trading instrument declines amid strong US data, as well as a lack of demand, bulls will have to protect $4,038. If this level is pierced, the trading instrument may plummet to $4,010 and $3,980.