Global markets experienced subdued trading activity on Monday due to holiday closures, yet various asset classes displayed distinct trajectories. U.S. markets were closed for Presidents' Day, while several Asian markets, including mainland China, were shut for the Lunar New Year holiday. European stocks saw modest gains, primarily driven by the financial sector, although advances were capped by declines in technology and luxury goods shares. Investor focus remained centered on the Federal Reserve's potential interest rate cut path and the impact of artificial intelligence (AI) on corporate earnings.

With Chinese markets closed, gold and silver lost a significant source of upward momentum, failing to maintain the rally spurred by Friday's cooler-than-expected U.S. CPI data which bolstered rate cut expectations. Gold retreated below the $5,000 per ounce mark. Industrial metals faced pressure following reports late Friday that the U.S. government was considering removing some steel and aluminum tariffs, while rising copper inventories weighed on base metals.

Last Friday's softer U.S. CPI inflation reading strengthened market expectations for Fed rate cuts this year. Traders have fully priced in a rate cut for July and see increased odds of a move in June. This expectation supported bond prices, with the benchmark 10-year U.S. Treasury yield hitting a near two-month low on Friday. With U.S. bond markets closed Monday, U.K. gilts extended their gains while German bunds stabilized.

Andrea Gabellone, Global Head of Equities at KBC Securities, noted, "The equity backdrop is positive following the CPI data." However, he added, "We could see more divergence ahead, as sentiment around key AI-related sectors remains crucial."

A series of important economic releases are scheduled for the week, including Tuesday's ADP private payrolls data and Wednesday's release of the Fed's January meeting minutes, from which investors will seek fresh signals on the economic outlook.

European equities edged higher, with bank stocks offsetting losses in the tech sector. The pan-European STOXX 600 index rose 0.13% to 618.52 points, halting a two-day losing streak but remaining below the record closing high set last Wednesday. Major European national indices were mixed. German shares fell after a rebound on Friday, while Italian stocks declined for a fifth consecutive session. UK stocks rose for a second day, hitting a new record closing high, and French and Spanish shares rebounded from three and four-day declines respectively. Spain's benchmark index, with its heavy weighting in banking stocks, performed best, closing up approximately 1%.

Banking stocks were the primary driver of the European rally. The banking sector within the STOXX 600, which suffered its worst weekly decline in over ten months last week due to AI disruption fears, closed up over 1.4%. Among constituents, UK bank NatWest surged nearly 4.8%, its largest daily gain since October 2025, after Citigroup analysts raised their price target to the highest on Wall Street and upgraded forecasts for its pre-tax profit and earnings per share, reflecting its acquisition of wealth manager Evelyn Partners and growth in net interest income.

Conversely, the technology sector within the STOXX 600 fell 1.05%. French software company Dassault Systèmes led the index's decliners, dropping over 10.4% as investors worried about its ability to meet 2029 revenue and cloud business targets.

Kathleen Brooks, Research Director at XTB, commented, "As the new week begins, the AI panic trade has paused. There's a growing belief that fears about AI consuming vast numbers of jobs and industries globally have been overblown. This week we might see a recovery in some of the most heavily sold-off sectors."

With U.S. cash markets closed, U.S. stock futures showed minor fluctuations. At Monday's New York close, S&P 500 futures were up 0.03%, Dow Jones futures rose 0.08%, while Nasdaq 100 futures fell 0.24%, reflecting cautious sentiment towards tech stocks.

The differential impact of AI across sectors is drawing close scrutiny from Wall Street institutions. Strategists at JPMorgan Chase, including Mislav Matejka, have issued warnings about stocks vulnerable to AI "cannibalization," such as those in software, business services, and media. Goldman Sachs Group has launched a new software stock basket, going long companies expected to benefit from AI applications while shorting those whose workflows might be displaced.

Despite divergence concerns, resilient corporate earnings remain a key support. Nataliia Lipikhina, Head of EMEA Equity Strategy at JPMorgan Chase, told Bloomberg Television, "When you look at the current earnings season, companies are showing 13% growth. Overall, that's why we remain positive on the S&P 500." Bloomberg strategists suggested global equities might pull back as divergent AI prospects weigh on mega-cap tech stocks and disruption-prone sectors, with any equity decline potentially helping bonds extend their rally. Goldman Sachs analysts noted that S&P 500 buybacks fell 7% year-over-year amid a surge in capital expenditure, with hyperscale cloud providers' capex plans ballooning to $660 billion, $120 billion higher than at the start of the earnings season.

The Lunar New Year holiday dampened trading momentum. Disappointing data from Japan showed the economy grew at an annualized rate of just 0.2% in the fourth quarter, far below the 1.6% consensus forecast, weighed down by government spending. The Nikkei 225 index, which rallied around 5% last week, closed down 0.2% on Monday. The Japanese Yen, which surged nearly 3% last week for its best weekly performance since November 2024, halted a five-day rally. USD/JPY turned higher early in the Asian session and maintained gains, reaching a daily high of 153.64 during European trading, up over 0.6%.

The Yen's retreat helped the U.S. dollar rebound after its post-CPI decline on Friday. The ICE U.S. Dollar Index (DXY) was mostly higher on Monday, reaching a daily peak of 97.12 during the typical U.S. afternoon session, up approximately 0.2%. Offshore Chinese Yuan (CNH), however, rebounded after halting a six-day advance on Friday. USD/CNH fell to a daily low of 6.9058 early in Asia before turning higher, reaching 6.8810 during early European trade—its highest level since April 21, 2023—and breaking above the 6.89 level intraday for the first time since April 2023, with a daily gain of 202 pips.

Bitcoin experienced volatility, briefly climbing back above $70,000 during European hours to set a new daily high before turning lower. It approached a daily low near $67,300 during the typical U.S. morning session, down over $2,000 or nearly 4% from its peak.

A heavy slate of economic data is due this week, including inflation figures from the UK, Canada, and Japan, preliminary global PMI readings, and U.S. Q4 GDP data on Friday. Jim Reid, a strategist at Deutsche Bank, stated, "Our economists expect U.S. real GDP growth to slow to 2.5% in the fourth quarter, a significant deceleration from the 4.4% pace in the prior quarter."

Precious metals retreated on Monday. Gold, which had reclaimed the $5,000 level on Friday, fell back below it and remained under pressure for most of the session. During Asian trading, New York gold futures hit a daily low of $4,981.9, down nearly 1.3%, while spot gold fell to $4,966.41, down about 1.5%. New York silver futures also stayed in negative territory, with COMEX March silver hitting a daily low of $74.57, down nearly 4.4%, while spot silver fell to $74.5948, down over 3.6%.

Analysts at Saxo Bank noted, "China has been a key driver of the sustained one-month rally in precious and some industrial metals, but Chinese markets will remain closed until February 23, which could limit near-term further upside. Key levels to watch for gold are $4,860 on the downside and $5,140 on the upside."

Base metals also faced pressure. London Metal Exchange (LME) futures were mostly lower on Monday. Tin led declines for a second session, falling over 2%. LME tin closed down $1,021, or 2.19%, at $45,681 per tonne, a fresh low since January 9. Zinc fell over 1%, with LME zinc closing down 1.44% at $3,290 per tonne, a low since January 23, joining aluminum and lead in a third consecutive day of losses. Aluminum and lead both hit their lowest levels in over a week. Copper, which edged higher on Friday, retreated to a more than two-week low. LME copper closed down 0.23% at $12,850 per tonne, its lowest since January 22. Nickel, however, edged higher after two days of declines, moving away from its lowest level in over a week.

Analysts attributed the decline in metals like aluminum to reports on Friday that the U.S. was considering cutting some steel and aluminum tariffs. Copper was additionally pressured by persistently rising inventories. Copper stocks in LME warehouses are growing at their fastest pace since July 2025, pushing combined inventories across the Shanghai, London, and New York exchanges above 1 million tonnes on Friday. Despite the potential positive of U.S. tariff removals, the fundamental backdrop for aluminum remains largely unchanged. Analysts at ING stated, "Global aluminum supply remains tight, inventories are scarce, speculative positioning is elevated, and policy risks are leading to increasingly fragmented regional markets."

International crude oil futures reversed early losses to close higher on Monday, replaying Friday's pattern. Both benchmarks fell over 0.6% at their European session lows but fully recovered during the day. During the typical U.S. afternoon session, U.S. WTI crude hit a high of $63.87, up nearly 1.6%, while Brent crude reached $68.76, up nearly 1.5%. Ultimately, Brent crude settled higher for a second consecutive day. With U.S. markets closed, there was no official settlement for WTI. Brent crude for April delivery settled up $0.90, or 1.33%, at $68.65 per barrel, continuing its recovery from the low hit last Thursday, which was the lowest since February 3.

OPEC+ members are scheduled to hold a virtual meeting on March 1st to discuss production policy for the coming months. Reports on Friday suggested OPEC is leaning towards restoring some oil production increases starting in April, responding to the upcoming summer fuel demand peak and potential price pressures from U.S.-Iran tensions. Naveen Das, Senior Crude Analyst at Kpler, predicted that OPEC+ will resume oil output growth after pausing increases in Q1 2026, gradually phasing out the remaining 1.66 million barrels per day of voluntary cuts over six months. However, not all OPEC+ members can fully meet production quotas, such as Russia which has limited capacity to ramp up. Consequently, Das does not anticipate a major downward shock to Brent prices, with Kpler currently forecasting an average price of $65 per barrel for the year.