On Monday, the world’s stock markets struggled to rise as investors processed news of a sudden drop in Chinese interest rates in the face of statistics indicating sluggish growth in the second-largest economy in the world. As a result, oil prices fell by about 2%.
Sentiment was also affected by weaker US stock index futures, and gold was hurt by a stable dollar.
The fall in the benchmark MSCI all country index for the year had been reduced to approximately 13% thanks to a month-long rebound.
Data indicated the economy unexpectedly slowed down in July, with manufacturing and retail activity being constrained by Beijing’s zero-COVID policy and a real estate crisis. In response, China’s central bank lowered key lending rates to boost demand.
Investors have been trying to predict how far higher rates will go when the US and European central banks meet next month.
Wall Street recorded gains for a fourth consecutive week as of Friday thanks to expectations of lower rate increases in response to indications that US inflation may have peaked.
The Nikkei share average in Tokyo increased to its greatest level in more than seven months thanks to Wall Street’s advances and Japan’s stable growth statistics.
“China, in my opinion, has a unique circumstance compared to the rest of the globe. Because of their zero COVID policy, they have a self-imposed recession “Patrick Armstrong, chief investment officer at the Plurimi Group, said.
If there is another leg down in the markets, I do believe the Fed will be the driving force. According to Mr. Armstrong, quantitative tightening will start in earnest in September and will drain market liquidity.
The markets continue to suggest that there is a 50% probability the Fed will raise rates by 75 basis points in September and that they will reach 3.50–3.75% by the end of the year.
The Fed will release the minutes from its most recent rate-setting meeting on Wednesday, but investor hopes that they will show the central bank starting to change its stance on rate rises may be crushed.
“I don’t think Powell (the Fed Chair) will say that, and I don’t think the minutes will show thing,” remarked Mr. Armstrong.
The STOXX share index of 600 elite firms in Europe increased 0.13 percent to 441.43 points, but it is still down around 10% for the year.
Easy US Futures
After last week’s gains, the S&P 500 and Nasdaq futures were both down about 0.5%.
Major retailers’ earnings, particularly those from Walmart and Target, will be closely examined for any indications of waning customer demand.
Chinese blue-chip stocks declined by 0.13 percent despite the country’s interest rates being slashed, while the currency and bond yields also decreased.
With a delegation of US congressmen visiting Taiwan for two days, geopolitical dangers are still very high.
Easy US Futures
After last week’s gains, the S&P 500 and Nasdaq futures were both down about 0.5%.
Major retailers’ earnings, particularly those from Walmart and Target, will be closely examined for any indications of waning customer demand.
Chinese blue-chip stocks declined by 0.13 percent despite the country’s interest rates being slashed, while the currency and bond yields also decreased.
With a delegation of US congressmen visiting Taiwan for two days, geopolitical dangers are still very high.
With the yield curve still firmly inverted, the bond market seems to be sceptical that the Fed can engineer a smooth landing. The yield on two-year notes, which is 3.27 percent, is significantly higher than the yield on ten-year notes, which was 2.86 percent.
The US dollar has been supported by these yields, despite falling 0.8% last week against a basket of currencies as risk sentiment increased.
However, the dollar found some stability on Monday as the euro fell 0.2% against the dollar to $1.02345 after rising 0.8% the previous week. After losing 1% last week, the dollar held steady against the yen at 133.51.
According to Capital Economics senior economist Jonas Goltermann, “Our opinion is that the dollar rise will restart soon.
Gold was down 0.8% at $1,786, giving up almost all of its 1% gains from the previous week.
As concerns about the world’s fuel consumption increased as a result of China’s poor results, oil prices decreased.
Saudi Aramco’s CEO said the company was prepared to increase output as many offshore US Gulf of Mexico rigs resumed production following a temporary outage last week. Saudi Aramco is the top exporter in the world.
While US crude slid 1.9% to $90.34 per barrel, Brent dropped 1.8% to $96.35.
