Global financial markets showed mixed movements on Monday as rising tensions in the Middle East tempered the optimism fueled by potential Federal Reserve interest rate cuts. The Stoxx Europe 600 index remained largely unchanged at the opening, with reduced liquidity due to UK markets being closed for a holiday. Meanwhile, US equity futures held steady after the S&P 500 and Nasdaq 100 both recorded gains exceeding 1% on Friday.
The US dollar index was flat following a significant decline on Friday—the largest in nine months. The Japanese yen appreciated for the second consecutive day as Asian-based funds increased their short positions on the greenback. US Treasury yields slightly decreased, with the two-year yield falling by approximately three basis points.
Market dynamics are being influenced by expectations of lower US borrowing costs, as Fed Chair Jerome Powell suggested on Friday that the time is ripe for a shift toward monetary easing. However, escalating conflict in the Middle East, particularly an Israeli strike on Hezbollah targets in southern Lebanon, has prompted some investors to seek safe-haven assets, leading to a 0.7% increase in crude oil prices.
Powell’s forthcoming speech at the Jackson Hole symposium is anticipated to be a pivotal moment in the Fed’s ongoing efforts to manage inflation, potentially leading to a reduction in the benchmark interest rate, which is currently at its highest level in over two decades. While signs of economic cooling justify a policy shift, there is no indication of an imminent economic contraction.
In China, the People’s Bank of China (PBOC) maintained its one-year policy loan rate at 2.3%, following a 20-basis-point cut in July. This decision reflects Beijing’s cautious stance on economic support amidst a rare contraction in bank loans and weak demand. The PBOC continues to navigate the balance between stimulating growth and managing financial risks associated with increased government bond purchases.
In commodities, iron ore prices continued to recover as China’s large inventories of the material are being depleted, signaling a possible easing of severe oversupply. Gold prices remained stable near record highs.
Upcoming Key Economic Events:
1.US Durable Goods Orders, Monday
2.China Industrial Profits, Tuesday
3.Germany GDP, Tuesday
4.Hong Kong Trade Data, Tuesday
5.Australia CPI, Wednesday
6.Nvidia Corp. Earnings, Wednesday
7.US GDP and Initial Jobless Claims, Thursday
8.US Personal Income, Spending, and PCE Price Data, Friday
Market Movements:
Stocks:
1.Stoxx Europe 600: Little changed as of 8:09 a.m. London time
2.S&P 500 Futures: Little changed
3.Nasdaq 100 Futures: Little changed
4.Dow Jones Industrial Average Futures: Little changed
5.MSCI Asia Pacific Index: +0.5%
6.MSCI Emerging Markets Index: +0.6%
Currencies:
1.Bloomberg Dollar Spot Index: Little changed
2.Euro: $1.1182 (unchanged)
3.Japanese Yen: +0.5% to 143.68 per dollar
4.Offshore Yuan: 7.1183 per dollar (unchanged)
5.British Pound: -0.1% to $1.3199
Cryptocurrencies:
1.Bitcoin: -1% to $63,606.51
2.Ether: -1.4% to $2,731.76
Bonds:
1.10-year Treasuries: Yield down two basis points to 3.78%
2.Germany’s 10-year yield: Little changed at 2.23%
3.Britain’s 10-year yield: -5 basis points to 3.91%
Commodities:
1.Brent Crude: +1% to $79.80 per barrel
2.Spot Gold: +0.1% to $2,516.20 per ounce
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