As traders brace for the Federal Reserve to lower interest rates, bonds have risen and triggered a surge in the yen, according to Bloomberg. Stock markets began the week with minimal movement, with Europe’s Stoxx 600 index slightly down and US equity futures steady. Investors are also analyzing the aftermath of a second attempted assassination of former President Donald Trump.
The expectation of a smaller interest rate gap between the US and Japan has pushed the yen to its highest level since July 2023, causing the dollar to weaken. Treasury bonds have seen gains, with the yield on the two-year note dropping to its lowest since September 2022.
This week brings the much-anticipated start of a US easing cycle, alongside monetary policy decisions in Brazil, South Africa, the UK, and Japan. The focus is on whether the Fed will opt for a 25 or 50 basis-point cut, while the Bank of Japan is expected to maintain rates after causing turbulence in global markets with a previous increase.
Katrina Ell, director of economic research at Moody’s Analytics, emphasized the importance of clear communication from central banks amidst market uncertainty, particularly following recent events.
Speculation of a 50 basis-point rate cut by the Fed has driven Treasury yields lower for two consecutive weeks. Swap traders are pricing in nearly 100 basis points of rate cuts by the end of the year.
In Asia, weak Chinese economic data has raised concerns about potential stimulus measures to support the economy. Factory output, consumption, and investment all fell more than expected in August, while the unemployment rate hit a six-month high.
Market holidays were observed in Japan, South Korea, and mainland China. Gold prices hit a record high as markets anticipate Fed easing, while oil prices stabilized after a recent uptick.
Key events this week include speeches from ECB officials, US economic data releases, rate decisions in various countries, and key indicators from major economies.
Market movements:
- European stocks slightly down
- US stock futures stable
- Asian markets up
Currency fluctuations:
- US Dollar weaker
- Euro stronger
- Yen surges
- Pound gains
Cryptocurrency prices:
- Bitcoin and Ether prices drop
Bond yields:
- US Treasury yields decline
- German and British yields stable
Commodity prices:
- Oil prices steady
- Gold prices rise
This article was created in collaboration with Bloomberg Automation and contributors Matthew Burgess and Margaryta Kirakosian.
Original article published by Bloomberg L.P.