Inflation and credit stress set a cautious tone for global markets Monday

Global markets on Monday are likely to be driven by three main forces: renewed inflation worries, rising credit stress with a flight to safety, and shifting expectations around artificial intelligence and cloud spending. First, inflation concerns have resurfaced after the latest U.S. Producer Price Index (PPI) data showed a sharp rebound in producer input costs, especially in services, swinging from negative at the start of the year to more than +7% now. These higher costs are increasingly being passed on to retailers and wholesalers, squeezing profit margins across many sectors. Investors now expect core PPI in mid-March to come in hotter than previously thought, with core inflation drifting away from the Federal Reserve’s 2% target instead of toward it. This raises the risk that central banks—especially the Fed—may delay or reduce the number of interest-rate cuts markets had been counting on. Higher-for-longer rates tend to pressure stock valuations globally, particularly in rate‑sensitive areas like growth stocks and highly leveraged sectors. Second, credit stress and broader risk aversion are weighing on sentiment. Equities sold off into the weekend, with major U.S. indices under pressure and a particularly sharp drop in the Nasdaq-100, suggesting investors are rotating out of higher-risk, growth-oriented assets. At the same time, government bonds saw strong demand, delivering their best monthly price gains in about a year as investors sought safety. This combination—equity weakness, credit concerns, and a bond rally—signals a more cautious global risk environment that could carry into Monday’s trading, affecting markets in Europe and Asia as they respond to U.S.-led risk repricing. Third, the macro narrative around artificial intelligence and cloud infrastructure is evolving, which may drive sector rotations even if it is less directly macro than inflation and credit. A new strategic partnership between Amazon and OpenAI points to potentially large shifts in cloud-AI infrastructure spending and competitive dynamics among major technology and cloud providers. While this is structurally positive for long-term investment in AI and digital infrastructure, it can also prompt investors to reassess valuations and reallocate capital within global tech markets. On Monday, this could show up as divergent performance within technology and communication services sectors, even as the broader market remains focused on inflation and credit conditions. Taken together, the dominant driver for Monday is likely to be macro: persistent inflation pressures and credit stress pushing investors toward safer assets and forcing a rethink of how quickly central banks can ease policy, with AI-related shifts in cloud spending acting as a secondary but notable theme for global tech valuations.