European stocks are set for a positive start following robust gains in Asian markets, initiating a pivotal week dominated by major central bank announcements and high-profile technology company earnings. The yen has strengthened amid these developments.
Euro Stoxx 50 futures indicate a 0.5% increase, mirroring upbeat sentiment in benchmark US contracts. Asian markets saw significant advances, spurred by growing expectations of interest rate cuts by the Federal Reserve.
Central bank decisions in Japan, the US, and the UK will headline this week’s economic agenda, amidst recent volatility triggered by the yen’s ascent, particularly in anticipation of the Bank of Japan’s potential rate hike. Market attention also focuses on earnings reports from tech giants Apple Inc., Amazon.com Inc., and Microsoft Corp., following a period of market turbulence sparked by their earnings releases.
The yen, buoyed by speculation of tightening monetary policies in Japan, recorded gains against major currencies on Monday. This resurgence positions it for its strongest monthly performance against the dollar this year.
Oversea-Chinese Banking Corp. analysts noted, “Watch for the trifecta of central bank policy decisions, with expectations for the FOMC to maintain rates but signal potential cuts soon.” The Bank of Japan is likely to announce quantitative tightening, while the Bank of England is anticipated to cut rates for the first time since 2020.
Meanwhile, Treasury 10-year yields eased slightly to 4.17%. In China, a robust bond rally continues to drive yields lower, reaching historic lows amidst regulatory concerns over financial stability.
Economists surveyed by Bloomberg expect the Fed to signal a rate cut in September at the conclusion of its meeting on Wednesday, with markets fully pricing in a move next month and potential additional cuts through 2025.
Stephen Gallagher, economist at Societe Generale, commented, “While the July FOMC meeting may not trigger an immediate cut, preparations for a reduction in September are underway.”
Ahead of the Fed’s decision, the Bank of Japan is expected to outline plans to reduce monthly bond purchases, with speculation also swirling around a rate hike. Last week, the yen’s 2.4% surge against the dollar intensified selling pressure on risk-sensitive currencies and contributed to the Nikkei 225 Index entering a technical correction.
The Bank of England is also anticipated to announce its rate decision this Thursday, with most economists forecasting a rate cut, marking the first adjustment since the onset of the pandemic.
In the commodities market, oil prices stabilized near a six-week low ahead of a crucial OPEC+ meeting, where discussions center on plans to increase supply amid concerns over global economic growth and new oil production from the Americas.
Key Events This Week:
Monday: McDonald’s, Heineken earnings
Tuesday: Microsoft earnings, European inflation and growth data
Wednesday: Bank of Japan policy decision, Meta Platforms earnings, Fed interest rate decision
Thursday: Bank of England sets official interest rate, Amazon and Apple earnings
Friday: US employment and factory orders, South Korea CPI
Market Movements:
1.S&P 500 futures up 0.4%
2.Nikkei 225 futures rose 2.3%
3.Euro Stoxx 50 futures increased by 0.4%
Currency and Commodity Highlights:
1.Bloomberg Dollar Spot Index stable
2.Bitcoin up 2.1% to $69,432.51
3.WTI crude rose 0.3% to $77.39 a barrel
With major economic indicators and corporate earnings in focus, global markets remain poised for volatility amid pivotal policy decisions and earnings releases this week.
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