European Stocks Rise With Data in Focus Before Fed: Markets Wrap

By Investor Empires On Sep 17, 2024

(Bloomberg) — European stocks rose as traders awaited a final batch of U.S. economic data that could determine the size of the Federal Reserve’s interest-rate cut on Wednesday.

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Retail and bank stocks led gains on the pan-European STOXX 600, while moves in other markets were muted ahead of the Federal Reserve’s decision. U.S. stock futures were flat.

On the eve of the Federal Reserve’s first rate cut in five years, investors will be focused on U.S. retail sales figures due later in the day. Markets are divided between expectations that the Fed will cut rates by 25 or 50 basis points.

“The August US retail sales report is arguably the most important release today, as the soft print is likely to have participants ‘go all in’ on the idea of a 50bp Fed rate cut tomorrow,” Michael Brown, a strategist at Pepperstone Group Ltd., wrote in a note. “Although it’s hard to imagine dovish bets being scaled back as aggressively if the data beats expectations.”

The dollar steadied after a four-day slide, while Treasury yields fell as investors looked ahead to the outcome of the Federal Reserve meeting.

In Asia, Japan’s Nikkei 225 index fell, weighing on regional stocks. Concerns over China’s weak economy persisted. Disappointing data over the weekend could add pressure on authorities to ramp up fiscal and monetary stimulus if the country is to meet its growth target this year.

Trading in China, Taiwan and South Korea is closed due to public holidays.

The yen steadied after rising above 140 against the dollar for the first time since July 2023 on Monday, as the Japanese currency extended its rally from its weakest point in about 38 years in July.

The yen has been steadily rising on market expectations that the interest rate differential between the United States and Japan will narrow further, sending export-dependent Japanese stocks lower.

The upcoming BoJ meeting could weigh on sentiment towards Japanese stocks, said Tony Sycamore, an analyst at IG Australia Pty Ltd. “If Ueda signals a possible rate hike in October, USD/JPY and the Nikkei are likely to come under renewed selling pressure.”

The Bank of Japan is expected to keep interest rates unchanged on Friday after raising them twice this year, with all 53 economists surveyed by Bloomberg saying the Ueda board will leave the benchmark rate at 0.25% when it concludes its two-day meeting.

In commodities, gold remained near record levels as traders bet that the metal would benefit from a weaker dollar and lower Treasury yields in the wake of the Federal Reserve’s decision. Oil rose slightly.

Main events this week:

Germany ZEW, Tuesday
US business inventories, industrial production, retail sales on Tuesday
Eurozone CPI, Wednesday
Fed Rate Decision Wednesday
UK interest rate decision, Thursday
US Board of Governors Index, Initial Jobless Claims, Existing Home Sales, Thursday
FedEx Earnings Thursday
Japan Interest Rate Decision, Friday
Eurozone Consumer Confidence, Friday

Some key movements in the markets:

Stocks

The Stoxx Europe 600 index was up 0.6% by 8:14 a.m. London time.
S&P 500 futures were little changed.
Nasdaq 100 futures rose 0.2%.
Dow Jones Industrial Average futures were little changed.
The MSCI Asia Pacific Index was little changed.
The MSCI Emerging Markets Index rose 0.4%.

Currencies

The Bloomberg Dollar Index was little changed.
The euro fell 0.1% to $1.1117.
The Japanese yen rose 0.1% to 140.42 yen per dollar.
The offshore yuan was little changed at 7.0995 against the dollar.
The pound fell 0.1% to $1.3201.

Cryptocurrencies

Bitcoin rose 1.6% to $58,579.36
Ether rose 1.2% to $2,301.45

Bonds

The yield on the 10-year US Treasury note fell one basis point to 3.61%.
The yield on the 10-year German bond fell by three basis points to 2.09%.
The yield on the 10-year British bond fell three basis points to 3.73%.

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This story was produced with the help of Bloomberg Automation.

–With assistance from Jason Scott, Masaki Kondo and Jake Lloyd Smith.