Let’s take a look at what’s happening in the European and global markets today, as reported by Wayne Cole.
Asian markets are continuing to ride the Powell rally wave on Monday, with yields and the dollar down and most stocks edging higher. The Nikkei, however, is not pleased with the yen climbing above 144.00 per dollar.
Oil prices have risen by 0.7% after Israel and Hezbollah exchanged rocket salvos and air strikes on Sunday, sparking concerns about potential supply disruptions if the conflict escalates.
Fed Chair Powell has shaken things up by focusing on the labor market’s health rather than inflation, hinting at a possible larger rate cut in September. This has increased the likelihood of a 50 basis point cut, with futures now pricing in a 38% chance of such a move and a total of 103 basis points of easing by Christmas.
The narrowing spread between ten-year and two-year yields, currently at 10 basis points, suggests a positive curve may be on the horizon. The lack of a positive curve despite high Treasury issuance indicates other factors keeping long-term yields suppressed.
The inverted curve’s ability to predict a recession is waning, with the Atlanta Fed’s GDPNow measure slowing to 2.0% annualized. Real consumer spending data on Friday will provide further insight into economic growth, potentially overshadowing inflation data given Powell’s emphasis on employment and growth.
Flash estimates for EU inflation are expected to support the ECB’s anticipated rate cut on September 19.
Nvidia’s earnings report on Wednesday will be a key event this week, with market expectations high. The company will need to surpass consensus by a significant margin to justify its high forward earnings multiple.
Market-moving events on Monday include the release of Riksbank meeting minutes, German Business Climate Ifo data for August, U.S. durable goods orders, Dallas Fed manufacturing survey, and a speech by Federal Reserve Bank of San Francisco President Mary Daly.
(By Wayne Cole; Editing by Muralikumar Anantharaman)