Global Market Outlook: A Week of Central Bank Decisions

Last week, the international market experienced volatility, with doubts surrounding the Federal Reserve’s 25 basis point rate cut resurfacing and gold hitting a new record high. U.S. stocks performed strongly, with the Dow Jones Industrial Average up 2.60%, the Nasdaq up 5.95%, and the S&P 500 up 4.02%. The three major European stock indices also rose across the board, with the UK FTSE 100 up 1.12%, the German DAX 30 up 2.17%, and the French CAC 40 up 1.54%.

Key Events to Watch This Week

This week, the suspense of the Fed’s policy shift will be revealed, and the Bank of England and the Bank of Japan may remain on hold. Emerging economies such as Indonesia, Brazil, and South Africa will also hold interest rate meetings. The Bank of Japan raised interest rates by 15 basis points, which once triggered fluctuations in the yen carry trade.

The Fed is Expected to Start an Easing Cycle

The U.S. CPI data for August showed that core inflation rebounded, and the probability of a 50 basis point rate cut once dropped to around 15%. However, after former New York Fed Chairman Dudley spoke out and several media reported that the decision at this meeting would be a difficult one, the probability rose back to over 40%.

In addition to the Fed’s interest rate decision itself, the updated dot plot and economic forecast will be the focus this month. Fed Chairman Powell said in a speech at Jackson Hole last month that they would not tolerate further weakness in the labor market. Investors then focused on employment-related data, and any signs of weakness could exacerbate the pricing of interest rate easing.

Crude Oil and Gold

International oil prices bottomed out and rebounded after Hurricane Francine disrupted production in the Gulf of Mexico, but concerns about the demand outlook remain. The front-month contract for WTI crude oil rose 1.45% to $68.65 per barrel, while the front-month contract for Brent crude oil rose 0.77% to $71.61 per barrel.

International gold prices hit a record high, and the optimism of the Federal Reserve’s upcoming interest rate cuts drove capital inflows and a decline in the US dollar. The COMEX gold futures contract for December delivery on the New York Mercantile Exchange rose 3.31% to $2,608.4 per ounce.

Bank of England May Remain on Hold

The Bank of England will hold its interest rate meeting this week. The bank restarted its easing cycle in August, but the committee is cautious about future rate cuts. Data has since shown that the UK PMI exceeded expectations in both July and August, while the labor market continues to improve.

What to Watch This Week

Companies worth watching this week include General Mills, United Express, Lennar, FactSet, etc. Key data releases include August retail sales, industrial production, and capacity utilization, new housing starts and building permits, and existing home sales data.

Source: China Business News