Global markets were mixed overnight, as weakness in technology stocks was offset by resilience in defensives and renewed strength across parts of the commodities complex. Investors continued to rotate across sectors rather than reduce risk outright, with currencies and metals acting as key transmission channels with a renewed focus on inflation, yield curves and currency volatility against sector rotation and macro data.
United States: Tech Weakness, Safe Havens Rotated
US equities showed clear sector divergence. The Dow Jones Industrial Average rose around 0.3%, while the S&P 500 and the Nasdaq slid 0.4% and 0.7% respectively, weighed down by continued pressure in software and tech giants. Profit-taking in parts of the AI and enterprise software space kept growth stocks on the back foot, even as industrials and consumer names showed relative resilience.
Europe: STOXX 600 Steady as Rotation Offsets Tech Weakness
European markets stood steady, with little change for the STOXX 600 down around 0.1%, as strength in defensives and financials offset weakness in technology and mining stocks. The FTSE 100 edged higher by around 0.2%, holding near recent highs, while continental indices traded mixed.
The session reflected continued sector rotation rather than broad risk aversion, with investors favouring earnings visibility and balance-sheet strength. Currency moves were contained, with the euro and sterling broadly steady against a firmer US dollar.
Asia & ASX: RBA Hike Absorbed, FX in Focus
Asian markets were mixed, with tech under pressure and currency dynamics dominating sentiment. The yen weakened further, with USD/JPY pushing back above 156, renewing focus on potential Japanese intervention should volatility accelerate.
In Australia, ASX 200 futures pointed around 0.2% lower. The RBA lifted the cash rate by 35 basis points from 3.60% to 3.85%, citing persistent inflation pressures. Notably, the move failed to materially disrupt local markets, with a slight dip following the rate hike announcement with all losses clawed back the next trading day. Thus suggests the hike was well-telegraphed and largely priced in after seeing Decembers CPI data. Rate-sensitive sectors remained orderly, reinforcing confidence in the RBA’s data-dependent approach.
Currencies: Dollar Firm, Yen Under Pressure
The US dollar index rose around 0.3%, supported by relative yield differentials and cautious risk sentiment. Yen weakness remained the standout FX story, with markets increasingly fixed on a possible Yen intervention. The Australian dollar traded little changed, balancing higher domestic rates against softer commodity prices.
What to watch next
- Yen price action and if further weakness or volatility could spark intervention risks. Keep an eye especially on Japan’s snap election results
- US data such as labour, CPI and services indicators, for signals on rate changes. For now they have been left on hold.
- RBA commentary, watch for clues on how they expect inflation and rates to go this year