A look at the day ahead in European and global markets from Wayne Cole.

It’s been a mostly upbeat start to the week for Asian shares, even though a holiday in U.S. markets has thinned liquidity. Hong Kong led the way again, tacking another 1.4% onto last week’s 7% jump amid optimism about potential low-cost AI adoption following the DeepSeek reveal.

Goldman Sachs has raised its outlookfor Chinese growth and stocks, arguing that widespread adoption of AI could raise earnings per share by 2.5% a year over the next decade. It would also lift the fair value of Chinese equity by 15% to 20% and attract $200 billion of fund inflows.

The rush has been led by a 24% jump in Alibaba on news it would partner with Apple to support iPhones’ artificial intelligence services offering in China. Alibaba reports earnings on Thursday and options imply the share could move 7.5% in either direction on the results.

The pan-European STOXX 600 index has also been attracting global funds, having climbed for eight straight weeks and up 8% since the turn of the year. EUROSTOXX 50 futures and DAX futures were both a fraction higher on Monday.

Japan’s Nikkei has been muted by a rising yen, which offset news of a strong 2.8% rise in annualised economic growth for the fourth quarter. Oddly, markets still only imply a minor chance of the Bank of Japan hiking again in March, presumably because that will be before the main round of wage negotiations is finished.

Even a May move is only priced at a one-in-four chance, which seems far too low given the run of data and the BOJ’s hawkish commentary.

The GDP surprise did help the yen push up to 151.55 per dollar. The U.S. currency has been on the back foot since a surprisingly weak January retail sales report challenged the whole economic “exceptionalism” meme.

Markets are back to wagering on two Fed rate cuts this year rather than one, with a move in June better than 50-50.

Central banks in Australia and New Zealand hold policy meetings this week and are both expected to cut interest rates, the former by 25 basis points and the latter by twice that.

Geopolitics remained in focus with reports that talks on the Russia-Ukraine conflict will begin in Saudi Arabia this week, though the participants are not entirely clear.

French President Emmanuel Macron will host an emergency European summit on Monday after U.S. officials suggested Europe would have no role in ending the conflict, a peace process that will seemingly be conducted between the U.S. and Russia.

Key developments that could influence markets on Monday:

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