A look at the day ahead in European and global markets from Wayne Cole.
Markets started the week with a day of consolidation after their best week this year, amid expectations of a softer than expected U.S. economy — or no decline at all, with many analysts forecasting continued growth of 2% to 3%.
Nasdaq futures were up about 0.2%, while Nasdaq futures were flat after rising about 9% last week. The euro remained above $1.1000, while the pound hit a one-month high of $1.2953.
Fed members Mary Daly and Austin Goolsbee were out over the weekend signaling the possibility of monetary policy easing in September, while minutes from the latest policy meeting due on Wednesday are expected to confirm the dovish outlook.
Futures are pricing in 100% for a quarter-basis-point cut and 26% for a 50-basis-point cut, and that will likely depend largely on whether the upcoming US jobs report shows the bounce that many are expecting.
In a cautionary note, Goldman Sachs noted that the annual payrolls reanalysis is due out on Wednesday and could show a downward revision in the range of 600,000 to 1 million jobs, although they argue that this would overstate the weakness in the labor market.
Federal Reserve Chairman Jerome Powell wraps up the week with his Jackson Hole speech on Friday, and markets are clearly anticipating a dovish outlook, although not one that would allow for a half-percentage point of monetary policy easing.
Markets are also fully pricing in a rate cut from the Swedish central bank on Tuesday, with the only debate being whether the cut will be 25 or 50 basis points.
Japan’s consumer price report could revive talk of a Bank of Japan rate hike, which has all but evaporated since the Nikkei’s recent slide.
Markets expect Japanese interest rates to rise by only 2 basis points in October, although some analysts still expect them to rise by 25 basis points to 0.5%.
On the US political front, the Democratic Party convention kicks off on Monday, with betting site PredictIt showing Vice President Kamala Harris at 58 cents compared to 45 cents for Donald Trump, a complete reversal from before President Joe Biden withdrew.
Key developments that could impact markets on Monday:
– The Swedish central bank begins a two-day monetary policy meeting
– Governor of the Central Bank of Finland and member of the Governing Council of the European Central Bank Olli Rehn speaks in New York
– Federal Reserve Chairman Christopher Waller speaks
(By Wayne Cole; Editing by Edmund Claman)