European stocks rebounded on Monday, with the STOXX 50 and STOXX 600 rising about 0.50% to reach new record highs, driven by a rally in defence stocks as European governments are expected to increase defence spending. European leaders convened in Paris to address Russia's invasion of Ukraine and formulate a response following indications from the US of restricted support for Ukraine. Meanwhile, US-Russia negotiations on the Ukraine war are set to take place in Saudi Arabia this week, with uncertainty surrounding Ukraine's participation and the exclusion of European nations.

The dollar strengthened against major global currencies on Monday as Federal Reserve officials stressed the need for caution in resuming interest rate cuts, prioritising the fight against inflation. Fed Governor Christopher Waller suggested holding off on rate cuts based on recent economic data, unless inflation mirrors the trends seen in 2024, while other key officials echoed this sentiment, advocating for patience until there is clear evidence that inflation is steadily moving toward the 2% target. Philadelphia Fed President Patrick Harker also backed maintaining current rates, citing the resilience of the economy. Meanwhile, traders are looking ahead to the release of the latest Federal Open Market Committee minutes this week for further clarity on the outlook for interest rates. The US stock market remained closed on Monday in observance of President’s Day.

The Shanghai Composite increased 0.27% to close at 3 356 points, while the Shenzhen Component gained 0.39% to 10 791 on Monday, extending recent momentum as President Xi Jinping chaired a meeting focused on promoting private sector growth. Chinese stocks have been climbing for the past two weeks, fuelled by DeepSeek’s breakthrough in artificial intelligence and its rapid adoption by Chinese companies, which has reignited investor enthusiasm in the technology sector.

Trading Economics also reported that Japan’s Nikkei rose 0.13% to 39 200, while the broader Topix Index gained 0.20% to 2 765 on Monday, recouping some losses from the previous session as investors welcomed stronger-than-expected economic growth data. The Japanese economy grew by 0.70% quarter-on-quarter in the fourth quarter of 2024, up from 0.40% in the previous quarter and exceeding expectations of 0.30%. On an annualised basis, GDP expanded by 2.80% in 4Q24, in line with forecasts and accelerating from a 1.70% growth rate in 3Q24. Despite the encouraging data, investor sentiment remained cautious due to lingering concerns over US tariffs under President Donald Trump and broader global economic uncertainties.

The FTSE/JSE All Share Index dropped by 0.85% to close at 88 399.57 points on Monday, with market sentiment shaped by a mix of global and domestic factors. The rand held steady against the dollar, trading at R18.35/$ as investors await Finance Minister Enoch Godongwana's budget speech, which is expected to outline the government's spending priorities, revenue strategies, and updated economic forecasts. Analysts predict that the budget deficit for the next three years will be larger than previously estimated in October.

Gold extended gains on Monday as uncertainty over US President Donald Trump’s tariff plans continued to dominate sentiment, driving safe-haven demand amid the fear of a potential global trade war. Business Day reports that spot gold rose 0.20% to $2 903.56/oz by 18h00 local time, while US gold futures gained 0.60% to trade at $2 916.80. Oil prices remained mostly unchanged as investors closely monitored progress on a potential Russia-Ukraine peace deal, which could ease sanctions and help stabilise global supply flows. Brent crude futures traded at $74.81 a barrel, while US West Texas Intermediate crude was stable at $70.75 a barrel.