Wall Street stumbled early on Monday after attempting to recover from last week’s late slump and Treasury yields likewise dipped, while German election results helped European shares and investors waited for Nvidia’s midweek earnings report.
The euro’s positive reaction to a conservative election victory in Germany, the currency bloc’s largest economy, capped the dollar.
U.S. stocks opened firmer on the back of a futures rebound, but then succumbed to more of the same uncertainty about U.S. growth and valuations and geopolitics that helped knock the S&P 500 back from record highs set early last week.
The S&P 500 was off 0.30% and the Nasdaq Composite fell 0.88%. The Dow Jones Industrial Average was slightly firmer.
In recent sessions, weak U.S. retail sales, consumer confidence and services purchasing managers’ reports, combined with higher-than-expected consumer price inflation have eroded market confidence and, amid uncertainty over a barrage of federal government layoffs, have put U.S. stagflation in the forefront of market thinking.
“Now we’re looking at other things, whether it’s uncertainty, geopolitical, whether we’re finally looking at earnings and things like that affect markets,” said Joe Saluzzi, co-head of equity trading at Themis Trading.
Saluzzi said investors are distracted by German elections, the war in Ukraine, and a range of other headlines. “People get scared quick.”
U.S. markets opened to a rally in German stocks and the euro, which reached a one-month high after Germany’s election result put centrist parties on track to form a coalition.
Friedrich Merz was set to become Germany’s next chancellor after his opposition conservatives won the national election on Sunday. Merz should be able to form a coalition to govern with the ruling centre-left Social Democrats, even though the party came third behind the far-right Alternative for Germany.
“In the end (it was) a result that was close to the latest exit polls and should be a very market-friendly outcome,” said Peter Schaffrik, global macro strategist at RBC Capital Markets.
The euro rose to a one-month high of $1.0528 before paring to last trade 0.1% higher at $1.0469.
Germany’s DAX stock index rose 0.16%. The pan-European STOXX 600 index turned 0.33% lower.
MSCI’s gauge of stocks across the globe fell 0.38%.
German coalition talks start as EU leaders are set to hold an extraordinary summit on March 6 to discuss additional support for Ukraine and how to pay for European defence needs.
This week marks three years since Russia began its full-scale invasion of Ukraine.
Wall Street took a hit on Friday when a survey on services showed a slide in activity amid concerns about tariffs and cost pressures.
The pullback has raised the stakes for Nvidia’s results on Wednesday when investors will be looking for further rapid growth in revenue.
The Federal Reserve’s favoured measure of core inflation is due on Friday and expected to show a slowdown to 2.6% from 2.8%, but any impact could be clouded by the focus on President Donald Trump’s reliance on import tariffs as a tool for economic policy and leverage over trade partners, which could be inflationary.
A survey of U.S. consumers out on Friday showed inflation expectations for the next five years climbed to 3.5%, the highest since 1995.
The dollar index, which tracks the currency against six peers, was off slightly at 106.62. The euro was up 0.07% at $1.0465.
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