(Reuters) — European stocks and American equity futures faced uncertainty as they entered a critical period, with important inflation data in the US on Wednesday followed by interest-rate decisions on both sides of the Atlantic.
Market sentiment was cautious as investors tried to navigate US recession concerns and the possibility of a soft landing, all while worrying that the Fed might be falling behind in its response as the labor market cools. Additionally, US political risk took center stage as former President Donald Trump prepared to debate US Vice President Kamala Harris.
“It may take some time before we can determine if the Fed successfully averted a recession or if it acted too late,” said Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management Co. “Given this uncertainty, we believe investors should be cautious about taking on excessive risks.”
Global equities saw net selling for the eighth consecutive week, led by North America, according to a report from Goldman Sachs Group Inc.’s prime brokerage desk. This trend began in May as funds began to unwind their positions in preparation for potential disruptions around the US presidential election.
Implied volatility for a key Bloomberg dollar index reached its highest level since the March 2023 banking crisis. The fear gauge for equities is on the rise again after spiking during the market turbulence of early August.
“The combination of increasing macro and political uncertainty puts pressure on the bulls in the short term,” said Konstantinos Venetis at TS Lombard.
On Wednesday, a US government report is expected to show that the consumer price index rose 2.6% in August from a year earlier. The Fed officials are in a blackout period ahead of the Sept. 17-18 meeting, so there will be limited new guidance from them.
“Inflation is a key factor,” said Chris Low at FHN Financial. “Weaker numbers might push the Fed towards a 50 basis-point cut, while higher numbers could lock in a 25 basis-point cut.”
In Asia, key equity indexes saw little change, with declines in shares in mainland China and South Korea. Tokyo and Sydney recorded modest gains following a positive session in US equities driven by renewed buying.
Oil prices slipped after a one-day increase driven by a return of risk appetite in broader markets. Gold prices retreated as traders awaited the US inflation data. Bitcoin dropped below $57,000, while aluminum continued its rebound due to a decrease in Chinese inventories and a surprising increase in overall exports from the top metal consumer.
Key events this week:
- Germany CPI, Tuesday
- US presidential debate between Donald Trump and Kamala Harris, Tuesday
- US CPI, Wednesday
- Japan PPI, Thursday
- ECB rate decision, Thursday
- US initial jobless claims, PPI, Thursday
- Eurozone industrial production, Friday
- Japan industrial production, Friday
- U. Michigan consumer sentiment, Friday
Here are some of the major market movements:
Stocks
- The Stoxx Europe 600 remained stable as of 8:17 a.m. London time
- S&P 500 futures showed minimal change
- Nasdaq 100 futures declined by 0.2%
- Futures on the Dow Jones Industrial Average remained stable
- The MSCI Asia Pacific Index dropped by 0.2%
- The MSCI Emerging Markets Index rose by 0.1%
Currencies
- The Bloomberg Dollar Spot Index showed little change
- The euro remained stable at $1.1043
- The Japanese yen fell by 0.2% to 143.48 per dollar
- The offshore yuan showed minimal change at 7.1268 per dollar
- The British pound rose by 0.2% to $1.3100
Cryptocurrencies
- Bitcoin fell by 0.2% to $56,892.78
- Ether rose by 0.2% to $2,346.25
Bonds
- The yield on 10-year Treasuries increased by two basis points to 3.72%
- Germany’s 10-year yield increased by one basis point to 2.18%
- Britain’s 10-year yield increased by three basis points to 3.88%
Commodities
This article was written with the help of Reuters Automation.
–With additional reporting by Jason Scott and Michael Msika.
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