Stock markets in London opened higher on Monday as investors awaited key US inflation data and a decision from the European Central Bank (ECB) on interest rates. Wall Street also opened higher, with traders focusing on Wednesday’s consumer price index report, which could impact the Federal Reserve’s decision on interest rates. Concerns about the Fed’s rate-hike campaign and its impact on inflation have raised fears of a severe recession in the world’s largest economy. However, US Treasury Secretary Janet Yellen expressed optimism about the economy, stating that she believed it was on track for a soft landing.
Meanwhile, the Paris and Frankfurt stock exchanges were also up in afternoon trading, despite the European Commission cutting its growth outlook for the eurozone. The commission reduced its 2023 growth forecast from 1.1 percent to 0.8 percent, citing the impact of higher borrowing costs on the eurozone economy. This data will be considered by the ECB when it meets on Thursday to decide whether to continue raising interest rates. Some analysts believe that weaker economic readings may prompt a debate among policymakers to pause the tightening cycle.
In Asia, traders in Tokyo and Hong Kong experienced losses, while London saw gains. Asian traders turned more positive throughout the day, following last week’s gains on Wall Street. Sentiment was lifted by news that China’s consumer price index rebounded in August after contracting the previous month. Although the 0.1 percent rise was lower than expected, it provided hope that the Chinese economy was slowly recovering after a challenging year.
Moving to currency markets, the yen strengthened after hitting a 10-month low against the dollar last week. Bank of Japan boss Kazuo Ueda’s comments were seen as hawkish, suggesting that policymakers would have a better understanding of wage rises later in the year, which is a crucial factor for rate decisions. The yen has fallen approximately 10 percent due to the Bank of Japan’s commitment to maintaining ultra-loose monetary policy, while the Fed has increased borrowing costs to a two-decade high. The yuan also experienced a rebound after hitting a 16-year low against the dollar. The People’s Bank of China announced that it would crack down on speculation that distorts the value of the currency, following months of volatility.
In energy markets, gas prices rallied as Chevron plants in Australia continued to experience strikes. Oil prices also saw an increase. However, concerns have been raised that elevated crude prices may lead to prolonged inflation, putting pressure on central banks to maintain high interest rates.
At 1345 GMT, key figures showed that the Dow in New York was up 0.5 percent at 34,737.55 points, the FTSE 100 in London was up 0.1 percent at 7,485.36, the DAX in Frankfurt was up 0.4 percent at 15,801.56, the CAC 40 in Paris was up 0.6 percent at 7,281.55, and the EURO STOXX 50 was up 0.5 percent at 4,256.78. In Asia, the Nikkei 225 in Tokyo closed down 0.4 percent at 32,467.76, and the Hang Seng Index in Hong Kong closed down 0.6 percent at 18,096.45. The Shanghai Composite in China closed up 0.8 percent at 3,142.78.
In currency markets, the dollar fell against the yen, with the exchange rate at 146.44 yen compared to 147.81 yen on Friday. The euro was up against the dollar at $1.0728 from $1.0702, while the pound was up against the dollar at $1.2533 from $1.2469. The euro was down against the pound at 85.63 pence from 85.83 pence.
West Texas Intermediate crude oil prices increased by 0.4 percent to $87.89 per barrel, and Brent North Sea crude rose by 0.6 percent to $91.22 per barrel.
More detail via The Times of India here… ( Image via The Times of India )