Weak European data caused the euro to decline and led to a rise in bond and share markets, while investors awaited Nvidia's results to assess the viability of the tech sector's high valuations.
The euro falls to a more than two-month low as weaker than expected euro zone data weighs on the currency, while world stocks rebound amid anticipation for Nvidia's earnings results and Federal Reserve Chairman Jerome Powell's speech at the Jackson Hole summit.
Germany's business activity has seen a sharp decline, leading to concerns of a recession, as the country's Purchasing Managers' Index (PMI) dipped to its lowest level in over three years. This decline in activity is impacting the wider eurozone economy as well, with the region at risk of slipping into recession. This economic downturn is accompanied by a worrying uptick in inflation and slow growth, particularly in Germany.
Weak manufacturing data in major economies led to a decrease in oil prices, despite a larger-than-expected drop in U.S. crude stocks, while market focus is on Federal Reserve Chair Jerome Powell's speech on interest rate outlook, and Iran's oil output is predicted to increase despite U.S. sanctions.
Market optimism around the US economy may decline as recent shifts in the Treasury yield curve indicate a potential trigger for a correction or rapid unwind in positions, with investors closely watching Federal Reserve Chair Jerome Powell's upcoming speech.
The mood among German businesses worsened in August, falling for the fourth consecutive month and raising concerns about a possible second recession; the Ifo business climate index dropped to 85.7, lower than expected, while the country's economy recorded zero growth in Q2.
European bonds and stocks fell as inflation data suggested that inflation in the euro region may not be fully subsiding, while utilities led the decline in the Stoxx Europe 600 and the German and Spanish inflation data complicated the outlook for European policy makers.
European stocks continue to decline due to weak German data and elevated oil prices, raising concerns about stagflation in the euro area.
European markets are set to open lower as investors await data releases and focus on economic data and interest rates, while global market sentiment has worsened; Asian markets were mostly lower and US stock futures were unchanged amid concerns over the Federal Reserve's interest rate policy; the British pound is lower after Bank of England Governor Andrew Bailey's comments on nearing peak rates; Goldman Sachs reveals its preferred sector in China and names two conviction list stocks; Boston Federal Reserve President Susan Collins says the central bank can proceed cautiously on future rate hikes; Morgan Stanley names a European bank as a top pick with 35% upside.
The US dollar's strength in the foreign exchange market, along with discussions of de-dollarization, highlights the divergence between the US and other major economies. The Dollar Index is on an eight-week rally, reaching a record high in international payments, while the euro's share has declined to a record low. In the week ahead, the US CPI and the ECB meeting are expected to be major events, with the US showing signs of inflation and weaker demand, and the euro facing challenges amid stagnation and inflation. China's CPI and PPI have shown some improvement, but the focus will be on yuan loans and real sector data. The eurozone's focus will be on the possibility of a rate hike by the ECB and the release of July industrial production figures. Japan's household consumption continues to fall, and the country may experience a contraction in Q3. The UK will release employment data and GDP details, while Canada will see data on existing home sales and the CPI. Australia will release its August employment data, and Mexico's peso positions may continue to adjust due to the winding down of the currency forward hedging facility.
The European Commission has revised down its economic forecast, citing high prices for goods and services as a significant factor, leading to reduced growth projections for the European Union and the eurozone. Germany is expected to experience a downturn, while inflation is projected to exceed the European Central Bank's target. Weak consumption, credit provisions, and natural disasters are also contributing to the loss of momentum in the economy. However, the report highlights the strength of the EU labor market with a low unemployment rate.
Uncertainty in various sectors, including potential strikes, government shutdowns, geopolitical tensions, and the question of future Federal Reserve interest rate hikes, is causing markets to lack conviction, but this week's inflation readings could provide direction for the markets. If inflation comes in below expectations, it may signal that the Fed will not hike rates further, while stronger-than-expected inflation could lead to more rate hikes and market volatility. Additionally, increasing energy prices and the potential strike by the United Auto Workers union add to the uncertainty.
European markets are pessimistic ahead of central bank meetings, energy prices raise the risk of secondary inflation, and the US dollar is gaining strength, which may negatively impact precious metals and cryptocurrencies.
Germany is projected to be the most heavily impacted by the global economic slowdown due to higher interest rates and weaker global trade, according to the Organisation for Economic Co-operation and Development (OECD), with its economy likely to shrink this year alongside Argentina and experience a weaker 2024. The slowdown in China, inflationary pressures, and tightening monetary policy are among the factors affecting Germany's growth. The OECD also warned of persistent inflation pressures in various economies and called for central banks to maintain restrictive interest rates until underlying inflationary pressures subside.
The Federal Reserve's upcoming rate decision is expected to have little impact on Bitcoin and traditional markets, with low volatility predicted due to the central bank's data-dependent stance and lack of surprises anticipated.
Investors are focusing on the release of economic reports on GDP and inflation as they evaluate the Federal Reserve's stance on interest rates and its efforts to cool down inflation. Metal prices have slipped due to concerns over global demand and the economy, and the risk of a government shutdown is also adding to the bearish sentiment. Earnings reports from various companies and core PCE inflation data are expected in the week ahead.
The economy's performance, including consumer spending, labor market conditions, and inflation, suggests a temporary positive outlook, but it may not be sufficient to prevent a decline in stock prices.
The gloom in the markets continues as German and Spanish inflation data, European consumer confidence data, and the potential government shutdown in the US fail to lift investor sentiment.
European and global markets are experiencing relief as bond yields and the dollar decrease while stock markets stabilize and gold prices rise, thanks to a cooler-than-expected U.S. private payrolls report and a significant drop in crude oil prices.
Concerns surround the upcoming release of U.S. payrolls data and how hawkish the Federal Reserve needs to be, as global markets experience a period of calm following a tumultuous week that saw Treasury yields rise to 16-year highs, crude oil prices drop, equities decline, and the yen strengthen. Japanese government bond yields are also causing concern, as investor sentiment towards the Bank of Japan's stimulus remains low.
The pound weakened against the euro and the dollar due to concerns about the British economy, with weak retail sales data and global market sentiment contributing to the decline.
Wall Street economists and the Federal Reserve have lowered the probability of a recession within the next year, citing declining inflation, a stable Federal Reserve, and strong economic growth, but this optimism is based on lagging economic data and fails to consider the potential negative revisions in the future.
