As we dive into the day ahead in European and global markets, there are multiple key factors to consider.
The Asian markets have witnessed an extension of the Powell rally on Monday, with yields and the dollar experiencing a dip while most stocks see a slight upward trend. However, the Nikkei seems to be the odd one out as it struggles with the yen climbing past 144.00 per dollar.
Oil prices have surged by 0.7% following tensions between Israel and Hezbollah, leading to rocket salvos and air strikes. Investors are concerned about potential disruptions in the oil supply if the conflict escalates further.
Federal Reserve Chairman Jerome Powell has caused a stir by focusing on the health of the labor market over inflation, hinting at a possible outsized rate cut in September. This shift has raised expectations of a 50 basis point cut next month, with futures indicating a 38% chance of such a move and a total of 103 basis points of easing by Christmas.
The inverted yield curve, a signal of an impending recession, is also under scrutiny as ten-year yields stand just 10 basis points below two-year. Despite ongoing Treasury issuance, longer-term yields remain suppressed, suggesting other factors are at play.
Meanwhile, the upcoming release of EU inflation estimates on Friday is anticipated to be favorable for an expected rate cut by the European Central Bank on September 19th.
In the tech sector, Nvidia’s earnings report on Wednesday will be a highlight of the week. The company will need to exceed market consensus significantly to justify its high forward P/E ratio of 37. Market expectations are high, with $28.8 billion in sales and Q3 guidance around $32 billion on the line.
Looking ahead, key market influences for Monday include the publication of minutes from the Riksbank monetary policy meeting, Germany’s Business Climate Ifo for August, U.S. durable goods orders, the Dallas Fed manufacturing survey, and a speech by Federal Reserve Bank of San Francisco President Mary Daly.
Stay tuned for more updates on market trends and insights on Extreme Investor Network.