Global equities returned to record levels on Tuesday, with Japanese markets extending their rally and software stocks stabilizing, boosting overall risk appetite. Meanwhile, investors are turning their attention to a series of key U.S. economic data releases scheduled over the coming days.

As of the latest update, Dow Jones futures advanced 0.06%, S&P 500 futures rose 0.11%, and Nasdaq futures climbed 0.06%.

Last week, global technology stocks, particularly software shares, faced selling pressure due to concerns that AI tools could disrupt business models, but they have since gradually stabilized.

In European markets, the Stoxx 600 index retreated slightly from the record high set at Monday's close. Kering surged 11% as signs of a turnaround emerged in its Gucci business. Alphabet Inc. initiated bond issuances denominated in pounds and Swiss francs after completing a $20 billion bond offering.

Following a strong rally in technology stocks, U.S. markets were largely flat in pre-market trading. After a surge that pushed the S&P 500 close to a new record, gains continued modestly on Tuesday.

Japanese stocks posted significant gains. Most major Asian markets closed higher on Tuesday. The Nikkei 225 extended its recent upward trend, closing 2.3% higher. Other markets saw more moderate increases: the Hang Seng Tech Index rose 0.5%, led by biotechnology stocks; the Shanghai Composite Index closed up 0.1%. Technology stocks in Hong Kong and mainland China saw slight rebounds, buoyed by the tech rally in U.S. markets on Monday. South Korea's Kospi gained 0.1%, while Thailand's SET index increased 0.4%.

Markets had anticipated that a high-profile election victory would benefit Japanese equities due to planned fiscal stimulus; more surprisingly, Japanese government bonds and the yen also rebounded this week—previously, markets widely expected them to face pressure. Investors now appear to be betting that political stability and stimulus measures will boost economic growth and improve market sentiment, leading to capital inflows.

Markets await U.S. economic data. Gold held above $5,000, with precious metals traders still awaiting new catalysts. Traders are preparing for a series of U.S. economic releases, starting with retail sales data due on Tuesday.

Economists and analysts expect U.S. retail sales for December to show solid performance, primarily supported by resilient consumer spending—despite high living costs and a still-fragile employment environment. In the coming days, markets will also receive non-farm payrolls and inflation data, along with several secondary indicators reflecting labor market conditions.

After experiencing a sell-off driven by AI-related factors last week, followed by a rebound, markets have entered a brief "calm period." Traders are watching how this week's data will influence expectations for the Federal Reserve's interest rate path.

Mike Kelly, Global Head of Multi-Asset at PineBridge Investments, stated: "We believe in this tech stock rally. You want to follow the new disruptive technologies permeating the economy, and you want to be on the side of the winners, not the losers. But the problem is, it's not obvious who the winners are. A year ago, who would have thought software stocks would be hit?"

He added: "It will be a bumpy ride because it's a disruptive technology, but you have to ride this 'wild horse' and not let go."

Karen Georges, Fund Manager at Paris-based Ecofi Investissements, said: "We expect the economic recovery to broaden in the second half of the year, but short-term data from the consumer side may be less optimistic. Nevertheless, we still do not expect the Fed to cut rates in the near term."

The renminbi staged a strong rebound. The U.S. dollar was largely flat after two consecutive days of declines, weakening during Asian trading hours following reports that Chinese regulators advised investors to reduce exposure to U.S. Treasuries, but it later recovered some losses.

In Asia, the renminbi strengthened to its highest level against the U.S. dollar since May 2023 after China instructed banks to limit their holdings of U.S. Treasury securities. This news reinforces the broader trend of "de-dollarization/diversification" in global asset allocation and could accelerate capital flows back into Chinese assets.

Federal Reserve Governor Stephen Miran downplayed the recent dollar weakness, stating that the dollar would need a more significant decline to substantially impact inflation. The renminbi rose to its strongest level against the dollar since May 2023 during Asian trading. The U.S. dollar index increased 0.1% to 96.925, after an overnight low of 96.791.

Non-farm payrolls may slow. Several key U.S. economic indicators are due this week, including December retail sales (previously delayed), released later on Tuesday, January employment data (also delayed from last week) on Wednesday, and inflation figures. Weaker employment data would increase the likelihood of Fed rate cuts, thereby putting pressure on the dollar.

White House economic adviser Kevin Hassett said on Monday that U.S. job growth could decline in the coming months, as the Trump administration's immigration policies may slow labor force growth, while new AI tools enhance productivity. Although this describes a broader trend, it also means Wednesday's employment data will be closely watched.

U.S. Treasuries strengthened, with the 10-year yield falling 2 basis points to 4.18%. The 10-year yield declined 1 basis point to 4.186%. Market focus shifted to U.S. January employment data due on Wednesday.

Germany's 10-year government bond yield fell 1.1 basis points to 2.828%. U.K. gilt yields retreated: the 10-year yield dropped 3 basis points to 4.501% as market sentiment stabilized after Prime Minister Keir Starmer secured support from senior Labour Party figures.

Bitcoin fell 2.3% to $68,708. IG analyst Chris Beauchamp noted that although cryptocurrency prices have recovered from last week's lows, there is no urgency for "buying the dip" in the market; he also suggested that gold's return above $5,000 could act as a constraint before a crypto rally begins. Bitcoin hit a 16-month low of $60,008 last Friday.

Oil prices edged lower in early trading, after rising more than 1% in the previous session. Brent crude fell 0.2% to $68.92 per barrel, while WTI declined 0.3% to $63.59 per barrel. Saxo Bank analysts noted that oil prices are struggling to break meaningfully above $70 amid market speculation that rising fuel costs might prompt the Trump administration to seek negotiations with Iran. On Monday, the U.S. Department of Transportation advised U.S.-flagged commercial vessels transiting the Strait of Hormuz to stay as far away from Iranian waters as possible, supporting oil prices.

Gold dipped slightly in early trading but held firmly above the $5,000 mark. Sucden Financial analysts stated that despite the price rebound, the movement appears more "position-driven" than due to new fundamental changes, with volatility still limiting broader participation; higher margin requirements and hedging costs are restricting the return of more commercial capital.

"Gold's rally is justified!" BNP Paribas sets a $6,000 target price. David Wilson, Head of Commodity Strategy at BNP Paribas, stated that gold prices could climb to $6,000 per ounce by the end of this year, with the gold-silver ratio also rising as macroeconomic and geopolitical risks persist.

Wilson noted that although the gold-silver ratio remains below its two-year average from the 1980s, it has rebounded. He said: "I think there is still room for further disconnect between the two. For me, gold's advantage is that it offers a type of risk protection that silver cannot provide."

Gold's outlook is also supported by continued central bank purchases, including Poland's announcement last month that it will buy an additional 150 tonnes of gold. Poland was the largest gold buyer last year.

He added that inflows into gold ETFs have remained stable, recovering after only a brief dip during last week's adjustment period.

Federal Reserve Governor Miran discussed balance sheet reduction: leave room for crises, but proceed gradually. Miran stated that the central bank should reduce the size of its balance sheet, but this should not prevent policymakers from implementing large-scale asset purchases during economic crises.

Miran pointed out that shrinking the Fed's balance sheet would reduce its footprint in financial markets while preserving policy options for future crises. Although Miran expressed support for a gradual balance sheet reduction plan, he emphasized that this goal cannot be achieved overnight.

Citigroup strategists also suggested that any resumption of quantitative tightening (QT) could once again pressure the approximately $12.6 trillion repo market.

Focus stocks. AI application software stocks extended pre-market gains: Datadog rose over 10%, Shopify gained nearly 5%, Unity advanced over 4%, Applovin and Snowflake each increased nearly 4%, and Palantir climbed over 2%.

Optical communication stocks continued their pre-market rise: Credo Technology surged over 17%, forecasting Q3 FY2026 revenue between $404 million and $408 million, far exceeding market expectations; Astera Labs continued its gain, rising over 5%, while Corning increased over 1%.

Spotify's pre-market shares jumped 11% as the company projected first-quarter profits above expectations.

Coca-Cola fell over 2% after reporting fourth-quarter net revenue that missed market expectations.

ON Semiconductor declined 4.8% as Q4 revenue dropped 11% and first-quarter guidance fell short of expectations.

AppLovin continued its rise, gaining 3.4% after a short-seller withdrew allegations against the company's major shareholders.

Ferrari surged nearly 10% due to strong demand, with orders booked through the end of 2027.

STMicroelectronics rose over 1% after announcing a collaboration with Amazon on data center construction.

Hasbro gained about 2% after reporting quarterly revenue that exceeded expectations.

BP fell 4.9% as adjusted profit for the last quarter met expectations, but the company paused its share buyback program.

AstraZeneca increased 2.2% after reporting profit and revenue growth for fiscal 2025 and providing positive guidance for the current year.

Philips rose 6.2% as both Q4 sales and earnings surpassed expectations.

Barclays continued its gain, rising over 1% after reporting Q4 results that beat expectations.

TSMC advanced nearly 3% after January sales reached a record high.