Global stocks remained stable on Tuesday, while the US dollar saw a slight recovery following overnight losses. The upcoming US inflation data, due to be released on Wednesday, will play a significant role in determining whether or not the Federal Reserve will raise rates further. Investors are closely monitoring this data, as well as the European Central Bank (ECB) meeting scheduled for Thursday. Additionally, the Bank of England’s expected rate rise next week may potentially be its last, as Britain reported a rise in its unemployment rate, indicating a cooling labor market and potentially easing pressure on the Bank to raise rates.
Europe’s Stoxx 600 index rose by 0.27%, with Britain’s FTSE performing even better with a gain of 0.67%. The FTSE’s strength was partly due to expectations that the weaker jobs data would result in a softer pound, making British stocks more appealing to foreign investors. The labor market data for the three months through July showed signs of a cooling economy, leading to slower inflation. Chris Scicluna, head of research at Daiwa Capital Markets, believes that this data supports the belief that the Bank of England will only raise rates once more before reaching a conclusion.
The news of the labor market cooling also had an impact on British government bonds, known as gilts. The data led to a bull steepening in the gilt market, with shorter-dated rates falling faster than longer-dated ones. The two-year gilt yield fell by nearly 6 basis points to 5.02%, while the 10-year gilt yield remained at 4.42%. The 10-year German bund yield stayed steady at 2.62% after recent gains, and the US 10-year yield remained at 4.278%.
The US dollar resumed its rise across the board after a small setback caused by movements in Asian currencies. Sterling fell by 0.25% to $1.2477, while the euro experienced a similar decline to $1.0719. The yen had its strongest day against the dollar in two months on Monday, following comments made by Bank of Japan Governor Kazuo Ueda, who suggested that short-term rates may need to rise by the end of the year. The Chinese yuan also had a strong day on Monday, its best in six months, but both currencies are still near their weakest levels of the year.
In Asia, investors took some comfort from the news that Country Garden, China’s largest private property developer, received approval from creditors to extend repayments on six onshore bonds by three years. This development helped ease concerns in the Chinese market.
Investors are eagerly anticipating the US inflation data to be released on Wednesday. Current expectations indicate that annualized core inflation will fall to 4.3% in August, while the headline number is predicted to rise to 3.6%. A lower-than-expected inflation rate may slow down the rise of the US dollar, while a higher rate could increase expectations for further rate hikes, potentially strengthening the dollar.
This week will also test investors’ appetite for risk, as British chip designer Arm Holdings plans to list in New York with the goal of raising nearly $5 billion. Additionally, the European Central Bank will hold its meeting on Thursday. Although it is more likely that the central bank will keep rates steady, a 25 basis point hike is still a possibility.
In the commodities market, Brent crude futures increased by 0.45% to $91.05 per barrel. Gold remained at $1,920 per ounce.
More detail via www.theepochtimes.com here… ( Image via www.theepochtimes.com )