US stock index futures opened with a sharp downward gap on Monday, but later managed to recover as traders fought to keep the market within the trading channel.

Weak CPI data from China heightened concerns about the global economic outlook ahead of key US inflation reports, due later this week. S&P 500 futures are currently trading nearly unchanged from Friday's closing level, while Nasdaq 100 futures slipped by 0.2% following a sell-off triggered by US wage data, highlighting that inflation remains a top economic concern. Treasury yields declined, while the dollar index strengthened.

The stock market has not had a great start of the second half of 2023. It's evident that the economy will continue to face significant pressure from Fed policy and high interest rates, as the battle against inflation is far from over. US Treasury Secretary Janet Yellen recently expressed her concerns about high base prices and did not rule out the possibility of a recession in the US next year.

Given that the focus is currently on inflation over an extended period, this week's data could prove decisive for the FOMC, with its monetary policy meeting slated for the end of the month. Traders will closely evaluate the US CPI data on Wednesday, followed by the PPI data the next day. If inflation rises, the risks of a looming recession will also escalate.

Another important factor is the earnings season for the second quarter, which is on the horizon. Investors are bracing themselves for increased volatility in the coming weeks. Markets anticipate what could be the worst earnings season since the end of the COVID-19 pandemic, when support and stimulus programs were at their peak and money flowed at historically low interest rates. Quarterly results will likely contain many negative outlooks, and a more substantial correction is likely, especially within the technology sector.

In the EU, the STOXX Europe 600 index fluctuated after experiencing its largest weekly decline since mid-March. Mining companies led the downward trend due to declining iron ore and copper prices. Shares of Rio Tinto Group fell more than 2% after its chairman warned of headwinds from China regarding raw materials. Bayer AG rose by 3.2% following the announcement that the company was planning to spin off its agricultural chemicals business.

Asian stock market indexes also declined for the fourth consecutive day, approaching the lowest closing level in over a month. The offshore yuan fell after the publication of statistic data, while oil prices retreated on Monday after last week's gains. Gold also went down.

As for the technical picture of the S&P 500, demand for the index has slightly diminished. While the bulls still have a chance to sustain the upward momentum, they must regain $4,405. A breakout above this level would likely propel the index towards $4,427 and $4,447. An equally important task for bullish traders will be maintaining control over $4,469 and $4,488, which will strengthen the bullish sentiment in the market. However, if risk appetite continues to wane, bulls must firmly establish themselves around the $4,382. A breakout below this level would push the instrument towards $4,357 and pave the way for further decline towards $4,332.