Following the release of mild US inflation data last Friday, which reinforced market expectations for Federal Reserve interest rate cuts this year, stock and bond markets experienced minor movements amid light holiday trading.

S&P 500 futures remained largely unchanged, while the Europe Stoxx 600 index edged up by 0.1%. Shares of NatWest Group climbed 4% after Citigroup raised its price target for the bank. After US Treasury yields hit their lowest levels since last December on Friday, German bunds and US Treasury futures stabilized.

Overall trading volumes were subdued due to the US President's Day holiday and the closure of mainland Chinese markets for the Lunar New Year. Despite the quiet trading, the direction of Fed policy remained a key focus for markets after the softer-than-expected US inflation data. Traders have fully priced in a rate cut for July, with a high probability also assigned to a cut in June.

Andrea Gabbellone, Global Head of Equities at KBC Securities, noted, "The overall environment for equities is positive following the CPI data." He added, "However, as market sentiment towards core AI-related sectors remains crucial, we could see greater divergence in sector performance moving forward."

Other strategists share a similar view and are attempting to distinguish between potential winners and losers in the AI sector.

A JPMorgan team led by Mislav Matejka cautioned investors to be wary of stocks facing risks of "business cannibalization" from AI, including companies in the software, business services, and media industries.

Major financial institutions are launching tools to capture this divergence. Goldman Sachs Group has introduced a basket of software stocks, going long on companies expected to benefit from AI adoption while shorting those whose workflows might be displaced.

As the impact of AI continues to ripple through markets, earnings resilience is becoming a key factor, particularly in the US market.

Natalia Lipikhina, Head of EMEA Equity Strategy at JPMorgan, stated, "Based on this earnings season, corporate profit growth has reached 13%, which is a core reason for our continued positive outlook on the S&P 500."

Later this week, traders will focus on Tuesday's ADP private payrolls data and the release of the Fed's January meeting minutes on Wednesday for fresh economic signals.

In other markets, gold prices retreated below $5,000 per ounce as investors took profits after the previous session's gains. The US dollar was stable. Bitcoin was trading near $68,436, directionless after a failed weekend rebound, marking its fourth consecutive weekly decline.

**Corporate Highlights**

NatWest Group recorded its largest gain since October after Citigroup raised its price target to the highest on Wall Street. The bank also upgraded its forecasts for pre-tax profit and earnings per share, citing the acquisition of wealth manager Evelyn Partners and improved net interest income.

Shares of Ørsted rose as much as 4% after analysts at Kepler Cheuvreux upgraded their rating, expressing optimism about the wind power operator despite ongoing uncertainties in the US market.

Warner Bros. Discovery is reportedly considering restarting sale negotiations after receiving a newly revised acquisition offer from Paramount.

According to Manager Magazin, Volkswagen plans to reduce costs by 20% by the end of 2028.

A consortium led by Macquarie Asset Management has agreed to acquire Qube Holdings for approximately A$11.7 billion ($8.3 billion).

**Key Market Performance**

**Equities** * S&P 500 Futures: Flat * Dow Jones Industrial Average Futures: +0.3% * Europe Stoxx 600: Flat * MSCI World Index: Flat

**Currencies** * Bloomberg Dollar Spot Index: +0.1% * Euro: -0.1% to $1.1855 * British Pound: -0.1% to $1.3631 * Japanese Yen: -0.4% to 153.34 yen per dollar

**Cryptocurrencies** * Bitcoin: -0.6% to $68,436.54 * Ethereum: +0.5% to $1,967.4

**Bonds** * 10-year US Treasury Yield: Flat at 4.05% * 10-year German Bund Yield: Flat at 2.75% * 10-year UK Gilt Yield: -2 basis points at 4.39%

**Commodities** * US WTI Crude Oil: +0.8% to $63.38 per barrel * Spot Gold: -1% to $4,990.30 per ounce