After a strong performance last week, global equities are experiencing a slight pause as Asian stocks take a breather on Monday. The anticipation of interest rate cuts in the U.S. economy has provided a sense of relief, with expectations that this move will help dodge a recession and address cooling inflation concerns.
Central Bankers Hint at Easing
Federal Reserve members, Mary Daly and Austan Goolsbee, have recently hinted at the possibility of easing in September. The minutes of the last policy meeting, set to be released this week, are expected to reinforce the dovish outlook. Fed Chair, Jerome Powell, is scheduled to speak in Jackson Hole on Friday, with investors eagerly waiting for any indications or acknowledgment of a potential rate cut.
The market is fully pricing in a quarter-point rate cut, with a 25% chance of a larger 50 basis points cut. Much of this decision will depend on the upcoming payrolls report. Despite caution from analysts at Goldman Sachs regarding potential downward revisions to the jobs series, the mood remains optimistic. S&P 500 futures are up by 0.2% and Nasdaq futures are ahead by 0.3%, building upon last week’s gains.
EuroSTOXX 50 futures have added 0.2% and FTSE futures have eased by 0.1%. In the Asia-Pacific region, shares outside Japan have edged up by 0.7%, continuing the positive momentum from last week. While Japan’s Nikkei has turned flat after a significant bounce, Chinese blue chips have firmed by 0.6%. Additionally, Sweden’s central bank is also expected to cut rates this week, possibly by 50 basis points.
Impact on Currency and Commodity Markets
In currency markets, the euro remains steady at $1.1025, slightly below last week’s peak. The dollar, on the other hand, has shown some volatility, standing at 147.79. The anticipation of Fed rate cuts has resulted in a softer dollar, which may continue in the near future. This, combined with lower bond yields, has helped gold prices to hold steady at $2,500 an ounce, nearing an all-time peak. On the other hand, oil prices have dipped again due to concerns about Chinese demand, with Brent falling to $79.62 a barrel and U.S. crude losing ground at $76.54 per barrel.
The global market sentiment remains positive as investors anticipate interest rate cuts and continued support from central banks. While challenges and uncertainties persist, the overall outlook seems to be leaning towards a softer landing for the economy. It is essential for market participants to stay informed and cautious amidst these evolving trends.