The Stoxx 600 rose 0.2%, while US equity futures also moved higher. Japan's Nikkei gained 2.1% and South Korea's benchmark rose 0.7%, while MSCI's global equity index increased 0.1%.
The market's resilience follows a weaker-than-expected US jobs report that reduced expectations for further Federal Reserve rate increases. Investors are now turning towards US inflation data due on Wednesday for additional evidence about the direction of monetary policy.
Economists expect July consumer inflation to rise 3.4% year-on-year, slightly below June's rate. If inflation remains contained, markets could maintain expectations for less restrictive monetary policy.
Energy prices remain a competing risk. Brent crude rose about 2% to $85 a barrel as investors assessed uncertainty over the reopening of Hormuz. Higher oil prices could complicate the inflation outlook if supply disruptions persist.
The interaction between rates and energy costs is important for corporate investment. Lower borrowing costs could support capital expenditure and economic activity, but a renewed energy shock could increase operating costs and weaken consumer purchasing power.
Corporate earnings are providing another source of support. Strong results have helped sustain equity valuations, while JPMorgan has raised its 2026 S&P 500 target to 8,000, citing strength in artificial-intelligence-related earnings and broader corporate performance.
However, investors remain exposed to several competing signals. Bond and currency markets are relatively stable, while the yen has weakened amid expectations that the Bank of Japan could raise rates in September.
For markets, the immediate test is whether inflation remains compatible with easier monetary conditions while geopolitical risks remain contained.
What to watch: US CPI data, oil prices, Federal Reserve expectations, corporate earnings and developments around Hormuz.
