Europe, China shine as US exceptionalism fades

A look at the day ahead in European and global markets from Rae Wee

Market movement on Monday continued the narrative of investors falling out of love with U.S. stocks and flocking to European and Chinese peers instead.

Wall Street futures sullied a wall of gain early in the day, failing to sustain last week's dip-buying rally that boosted all three major U.S. stock indexes.

Monday's dismal reversal of fortunes for U.S. stocks could stem from U.S. Treasury Secretary Scott Bessent commenting on Sunday about there being "no guarantees" that the world's largest economy will avoid recession, just a week after U.S. President Donald Trump declined to rule one out.

Investors have sought refuge from the tumultuous U.S. stock market by pouring into a type of exchange-traded fund that offers a trade-off - a cap on potential gain in return for a cushion against possible loss.

But across the Atlantic, a different story is playing out.

Investors optimistic about Germany's fiscal reset plan have poured money into European stocks, sending the pan-continental STOXX 600 up more than 7% for the year so far.

Germany's DAX has similarly gained more than 15% to date, compared with the S&P 500 index's 4% fall.

European stock futures again pointed to a strong opening on Monday, with EUROSTOXX 50 futures up 0.17% and DAX futures gaining 0.35%.

Germany's parliamentary budget committee on Sunday approved plans for the massive increase in state borrowing to bolster defence and revive economic growth.

The bill, which includes a 500 billion euro ($540 billion) fund for infrastructure and changes to borrowing rules, will require a two-thirds majority in a parliamentary vote scheduled for Tuesday.

Similarly for China, once beaten-down stocks have emerged as unlikely beneficiaries of Trump's whipsawing tariff policies.

Coupled with a major rally in tech shares following Chinese AI startup DeepSeek's splashy debut of its R1 reasoning model, Hong Kong's Hang Seng Index - where many major Chinese companies are listed - is up nearly 20% so far this year.

The situation in China is also improving.

Official data on Monday showed retail sales growth quickened in January-February, in a welcome sign for policymakers even as joblessness rose and factory output eased.

A day earlier, the State Council unveiled what it called a "special action plan" to boost domestic consumption, featuring measures including increasing residents' income and establishing a childcare subsidy scheme.

That in turn came days after the financial regulator promised to relax consumer credit quotas and loan terms as it offers long-term backing to make available large sums.

Investors will be bracing for a busy week filled with central bank policy decisions including from the Federal Reserve.

The Fed is widely expected to keep interest rates on hold, though traders will be looking for hints about further cuts that could restore calm to markets.

And in geopolitics, Trump said he planned to speak to Russian President Vladimir Putin on Tuesday and discuss ending the war in Ukraine.

Key developments that could influence markets on Monday:

(By Rae Wee; Editing by Christopher Cushing)