Global financial markets are soaring: the Federal Reserve and Chinese stimuli are driving stocks and commodities higher
September 5, 2023 4:23 am
Today, global stocks are joyfully surging, reflecting the futures index’s rise on the S&P 500 at 0.2-0.3%. This positive sentiment is also spreading to commodity markets, where oil and gold are rising amid weakening dollar flags.
It is important to note that the American holiday restrained trading activity ahead of the release of key economic data, including reports on the US services sector, the state of Chinese trade, and inflation scheduled for the coming days. Nevertheless, investors remain hopeful of further actions from China, including the possible relaxation of real estate market restrictions.
An important event eagerly awaited by investors is the release of the “Beige Book” – the monthly commentary by the US Federal Reserve on the current state of the American economy. This publication is scheduled for Wednesday and will have a significant impact on the market. It is also worth noting that on Thursday, the third and final estimate of the Eurozone GDP for the last quarter is expected, which will also attract the attention of investors and analysts.
Important steps in Chinese economic policy, such as the approval of the extension of payments on private bonds by Country Garden, as well as other measures taken in recent weeks, are beginning to yield results. These changes can have a positive impact on the economy and the mood in the country, according to Lazard’s Chief Market Strategist, Ron Temple. He expressed hope that, despite some uncertainty in Chinese policy, such steps, including the stabilization of PMI data, may herald a change in investor sentiment.
The technology sector will also be riding high this week with the initial public offering of shares from the microchip giant Arm Holdings, which is valued at 50-54 billion dollars. S&P 500 and Nasdaq futures are confidently rising by 0.2-0.3%, and European stocks are approaching monthly highs. The growth of technology companies such as ASML and Novo Nordisk has added 0.3% to the STOXX 600 index (.STOXX), and these companies have even temporarily surpassed LVMH, becoming the most valuable company in Europe.
It is also important to note that stocks rose after the August U.S. employment report, which reinforced expectations of no interest rate hike. Although the overall number of jobs exceeded expectations, revisions to previous months’ data and a decrease in wage growth indicate labor market softening. The unemployment rate also increased due to more people entering the job market, leaving the job vacancy-to-unemployment ratio at its lowest level since September 2021.
Against the current market conditions, futures markets reflect significant changes in investor expectations. Currently, there is a 93% probability that interest rates will remain unchanged this month, with a 67% probability of the tightening cycle coming to an end. This is becoming increasingly clear given the upcoming Federal Reserve policy meeting and a series of speeches by its representatives this week.
Christine Lagarde, the head of the European Central Bank, emphasized the importance of strengthening inflation expectations for policymakers. Given several weak economic data points, the market is starting to lean towards the expectation of a rate hike at the upcoming meeting in September.
Against the backdrop of the relative success of the American economy, the dollar is strengthening, reaching a level of 146.33 yen, approaching a recent 10-month high of 147.37. The euro is also rising by 0.3% to $1.0803 but remains within the recent low of $1.0765.
As for commodities, oil remains in focus, trading close to a seven-month high. This is happening amid supply cuts, and expectations that Saudi Arabia will extend the oil production cut until October are supporting oil prices. Brent crude oil futures rose by 0.2% to $88.75 per barrel, and U.S. oil futures reached $85.73.
The material has been provided by InstaForex Company – www.instaforex.com
Today, global stocks are joyfully surging, reflecting the futures index’s rise on the S&P 500 at 0.2-0.3%. This positive sentiment is also spreading to commodity markets, where oil and gold are rising amid weakening dollar flags.
It is important to note that the American holiday restrained trading activity ahead of the release of key economic data, including reports on the US services sector, the state of Chinese trade, and inflation scheduled for the coming days. Nevertheless, investors remain hopeful of further actions from China, including the possible relaxation of real estate market restrictions.
An important event eagerly awaited by investors is the release of the “Beige Book” – the monthly commentary by the US Federal Reserve on the current state of the American economy. This publication is scheduled for Wednesday and will have a significant impact on the market. It is also worth noting that on Thursday, the third and final estimate of the Eurozone GDP for the last quarter is expected, which will also attract the attention of investors and analysts.
Important steps in Chinese economic policy, such as the approval of the extension of payments on private bonds by Country Garden, as well as other measures taken in recent weeks, are beginning to yield results. These changes can have a positive impact on the economy and the mood in the country, according to Lazard’s Chief Market Strategist, Ron Temple. He expressed hope that, despite some uncertainty in Chinese policy, such steps, including the stabilization of PMI data, may herald a change in investor sentiment.
The technology sector will also be riding high this week with the initial public offering of shares from the microchip giant Arm Holdings, which is valued at 50-54 billion dollars. S&P 500 and Nasdaq futures are confidently rising by 0.2-0.3%, and European stocks are approaching monthly highs. The growth of technology companies such as ASML and Novo Nordisk has added 0.3% to the STOXX 600 index (.STOXX), and these companies have even temporarily surpassed LVMH, becoming the most valuable company in Europe.
It is also important to note that stocks rose after the August U.S. employment report, which reinforced expectations of no interest rate hike. Although the overall number of jobs exceeded expectations, revisions to previous months’ data and a decrease in wage growth indicate labor market softening. The unemployment rate also increased due to more people entering the job market, leaving the job vacancy-to-unemployment ratio at its lowest level since September 2021.
Against the current market conditions, futures markets reflect significant changes in investor expectations. Currently, there is a 93% probability that interest rates will remain unchanged this month, with a 67% probability of the tightening cycle coming to an end. This is becoming increasingly clear given the upcoming Federal Reserve policy meeting and a series of speeches by its representatives this week.
Christine Lagarde, the head of the European Central Bank, emphasized the importance of strengthening inflation expectations for policymakers. Given several weak economic data points, the market is starting to lean towards the expectation of a rate hike at the upcoming meeting in September.
Against the backdrop of the relative success of the American economy, the dollar is strengthening, reaching a level of 146.33 yen, approaching a recent 10-month high of 147.37. The euro is also rising by 0.3% to $1.0803 but remains within the recent low of $1.0765.
As for commodities, oil remains in focus, trading close to a seven-month high. This is happening amid supply cuts, and expectations that Saudi Arabia will extend the oil production cut until October are supporting oil prices. Brent crude oil futures rose by 0.2% to $88.75 per barrel, and U.S. oil futures reached $85.73.
The material has been provided by InstaForex Company – www.instaforex.com
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