European stocks and American equity futures struggled to find direction on Tuesday as investors brace for a crucial period. Upcoming key inflation data in the US on Wednesday and anticipated interest-rate decisions on both sides of the Atlantic are expected to significantly influence market movements.
Performance of Major Indices
The Stoxx Europe 600 index remained relatively unchanged. AstraZeneca Plc saw a significant drop of over 5% following mixed results from a trial of its lung cancer drug. In the US, futures dipped slightly after the S&P 500 experienced a 1.2% rise on Monday, recovering from its worst start to the month since 1953. Benchmark Treasury yields edged higher, while the dollar maintained its gains from Monday.
Investor Sentiment and Economic Concerns
The market mood remains cautious as investors weigh the potential for a US recession against the possibility of a soft landing. Concerns are growing that the Federal Reserve may be lagging in its response as the labor market shows signs of cooling. Additionally, US political risk has resurfaced, with former President Donald Trump scheduled to debate US Vice President Kamala Harris later Tuesday.
Brent Schutte, Chief Investment Officer at Northwestern Mutual Wealth Management Co., commented, “It may take some time before we can tell for certain that the Fed successfully stemmed the slowdown and avoided a recession or if it acted too late and the economy is destined to fall into contraction. Given this uncertainty, we believe investors would be well served by being mindful of taking on outsized risks.”
Global Equity Trends
According to Goldman Sachs Group Inc.’s prime brokerage desk report for the week ending September 6, global equities have been net sold for eight consecutive weeks, predominantly led by North America. This trend reflects a broader movement that began in May as funds began unwinding positions to increase liquidity in anticipation of potential market dislocations related to the US presidential election.
Volatility and Market Metrics
The three-month measure of implied volatility dollar gauge is near its highest level since the March 2023 banking crisis. Equities’ fear gauge has also risen following the market turmoil in early August. Konstantinos Venetis from TS Lombard noted, “The mix of rising macro (growth) and political (US election) uncertainty increasingly puts the burden of proof on the bulls in the near term.”
Upcoming Economic Reports
On Wednesday, a US government report is expected to show a 2.6% rise in the consumer price index for August, according to economists surveyed. This would represent the smallest increase since 2021. The Federal Reserve will remain in its traditional blackout period ahead of its September 17-18 meeting, offering little new guidance.
Chris Low at FHN Financial stated, “Inflation matters. Weaker numbers might encourage the Fed toward a 50 basis-point cut, while anything higher could lock in 25 basis points.”
Regional Market Movements
In Asia, a key equity index was little changed, with shares in mainland China and South Korea declining. Tokyo and Sydney recorded modest gains following a positive US equities session fueled by renewed dip-buying. Oil prices inched down after a brief gain, while gold retreated as traders awaited US inflation data. Bitcoin fell below $57,000, and aluminum extended its rebound due to a decline in Chinese inventories and an unexpected increase in exports.
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
- Market Summary
Stocks
The Stoxx Europe 600 was little changed as of 8:17 a.m. London time
- S&P 500 futures were little changed
- Nasdaq 100 futures fell 0.2%
- Futures on the Dow Jones Industrial Average were little changed
- The MSCI Asia Pacific Index fell 0.2%
- The MSCI Emerging Markets Index rose 0.1%
Currencies
The Dollar Spot Index was little changed
- The euro was little changed at $1.1043
- The Japanese yen fell 0.2% to 143.48 per dollar
- The offshore yuan was little changed at 7.1268 per dollar
- The British pound rose 0.2% to $1.3100
Cryptocurrencies
- Bitcoin fell 0.2% to $56,892.78
- Ether rose 0.2% to $2,346.25
Bonds
- The yield on 10-year Treasuries advanced two basis points to 3.72%
- Germany’s 10-year yield advanced one basis point to 2.18%
- Britain’s 10-year yield advanced three basis points to 3.88%
Commodities
- Brent crude fell 0.5% to $71.47 a barrel
- Spot gold was little changed
Conclusion
As markets navigate a crucial week of economic indicators and political developments, uncertainty remains high. The upcoming inflation data and central bank decisions are expected to provide significant insights into the economic outlook and influence market trends. Investors are advised to stay informed and prepared for potential volatility as the financial landscape continues to evolve.
Related Topics:
