The global equities market seems to be experiencing a period of optimism as Asian stocks were taking a breather on Monday. This sigh of relief comes after global equities enjoyed their best week in nine months on expectations the U.S. economy would dodge a recession. Moreover, there are expectations that cooling inflation would kick off a cycle of interest rate cuts, further boosting market confidence. Federal Reserve members Mary Daly and Austan Goolsbee have flagged the possibility of easing in September, with minutes of the last policy meeting due this week likely to underline the dovish outlook. Additionally, Fed chair Jerome Powell is expected to acknowledge the case for a rate cut in an upcoming speech.
The prospect of lower borrowing costs has seen gold clear $2,500 an ounce for the first time, while the dollar has dipped against the euro. However, safe-haven currencies like the yen and Swiss franc have receded as risk appetites have recovered in the market. The overall sentiment seems to be leaning towards a positive outlook, with the inflation scare that dominated policy debate seeming to have largely vanished. Barclays economist Christian Keller suggests that although inflation may not be at the 2% target yet, it is close and moving in the right direction.
Futures are fully priced for a quarter-point rate cut, with a 25% chance of a 50 basis points cut, contingent on the upcoming payrolls report. Analysts at Goldman Sachs have cautioned that annual benchmark revisions to the jobs series are expected soon, which could lead to a downward revision of positions. Despite this, the expectation of a soft landing for the U.S. economy has led to positive movements in the S&P 500 and Nasdaq futures, building on last week’s gains.
EuroSTOXX 50 futures have added 0.2%, while FTSE futures have eased 0.1%. The broadest index of Asia-Pacific shares outside Japan has edged up 0.7%, with China’s blue chips firming by 0.6%. The Fed is not alone in considering looser policy, as Sweden’s central bank is also expected to cut rates. In currency markets, the euro remains steady at $1.1025, with the dollar at 147.79. The overall Fed message this week is expected to reassure market participants about imminent policy rate cuts, potentially leading to further weakness in the dollar. A combination of a softer dollar and lower bond yields has helped gold hold at $2,500 an ounce, nearing an all-time peak.
Oil prices have dipped due to concerns about Chinese demand, with Brent falling 6 cents to $79.62 a barrel and U.S. crude losing 11 cents to $76.54 per barrel. The commodities market seems to be responding to the overall sentiment in global markets, with uncertainty surrounding economic growth and demand affecting prices across different asset classes.
The global market trends indicate a cautious optimism driven by expectations of interest rate cuts and easing inflationary pressures. Central banks around the world are contemplating looser policies, with market participants closely watching for any signals from key policymakers. Despite some concerns in the commodities market, the overall sentiment seems to be positive as investors anticipate further developments in the coming weeks.