A take a take a look at the day ahead in European and global markets from Wayne Cole.
Asia has seen an extension of the Powell rally thus far on Monday with yields and the dollar down, and most stocks edging higher. The important thing exception being the Nikkei, which really doesn’t appreciate the yen’s climb through 144.00 per dollar.
Oil prices climbed 0.7% after Israel and Hezbollah traded rocket salvos and air strikes on Sunday, stirring worries about possible supply disruptions if the conflict escalated.
Powell put the cat amongst the various doves along together with his sudden emphasis on the health of the labour market over and above inflation, mainly saying the Fed won’t tolerate a weaker employment outlook. That lowered the bar for an outsized cut of fifty basis points in September, with futures now implying a 38% probability of such a move and 103 basis points of easing by Christmas.
Ten-year yields of three.79% are only 10 basis points under the two-year and it could’t be long before the curve turns properly positive. Indeed, it’s surprising that hasn’t happened already, particularly given the sheer scale of Treasury issuance, and suggests something extra is keeping longer-term yields down.
Time could be running out for the inverted curve to predict a recession, though the Atlanta Fed GDPNow measure has slowed to an annualised 2.0%, from 2.4% mid-month. Figures on real consumer spending on Friday will help refine that number, and can actually be more essential than the core PCE deflator given Powell’s think about growth and employment.
Flash estimates for EU inflation are also due on Friday and analysts assume it ought to be benign enough for the ECB to cut as expected on Sept. 19.
The other primary event of the week will probably be Nvidia’s results on Wednesday where it should have to beat consensus by a lot to justify its stratospheric p/e of 37 forward earnings.
Markets are looking for $28.8 billion of sales and Q3 guidance around $32 billion, and it should have to top that by in any case just a few billion. Options imply a move of 9% or more might be going after the outcomes, a serious amount of cash given its market cap is type of $3.2 trillion.
Key developments that may influence markets on Monday:
– Riksbank publishes minutes from monetary policy meeting
– German Business Climate Ifo for Aug
– U.S. durable goods orders, Dallas Fed manufacturing survey
– Federal Reserve Bank of San Francisco President Mary Daly speaks
(By Wayne Cole; Editing by Muralikumar Anantharaman)