Pullbacks from last week’s movements and positioning ahead of potential market movers this week led to significant fluctuations in major assets on Monday.
Here’s a summary of the key headlines influencing market action:
Headlines:
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Japan: Bank lending growth slowed to 3.0% YoY in August, down from 3.2% and below the 3.2% forecast.
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The current account surplus widened to 2.80 trillion JPY, exceeding the 2.08 trillion JPY forecast, up from 1.78 trillion JPY.
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The final GDP reading for Q2 2024 was downgraded to 0.7% QoQ from 0.8%, while the price index was upgraded to 3.2% from 3.0%.
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Japan’s Chief Cabinet Secretary, Yoshimasa Hayashi, indicated that the BOJ is prepared for further interest rate hikes.
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China: Consumer Price Index (CPI) increased from 0.5% YoY to 0.6% in August, missing the 0.7% forecast. Producer Price Index (PPI) fell 1.8% YoY, worse than the expected -1.5% and previous -0.8%.
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Eurozone: Sentix investor confidence index declined further to -15.4 in September from -13.9, with concerns about recessionary risks exacerbated by economic troubles in Germany.
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Crude Oil: Prices increased due to risk recovery and potential disruptions from a hurricane impacting production and refining in the U.S. Gulf Coast.
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U.S.: The Conference Board Employment Trends Index rose from a revised 108.71 to 109.04 in August, signaling a sustainable pace of labor market slowdown.
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Australia: Westpac reported a 0.5% decrease in consumer sentiment, falling from 85.0 to 84.6 in September. Attention may be shifting from cost of living concerns to job prospects.
Market Price Action
With a light economic calendar, most major assets reversed some of Friday’s selloff.
Global stocks gained ground, buoyed by bargain hunters and reduced fears of a severe U.S. economic slowdown. Bitcoin (BTC/USD) joined the rally, briefly peaking near $58,000 before settling at $57,100.
Gold initially dipped to Friday’s lows during early European trading but found support from expectations of future Fed rate cuts. XAU/USD rebounded from $2,485, closing the day just above $2,500. Similarly, reduced speculation about a 50-bps Fed rate cut helped U.S. bonds, with 10-year yields dropping to their lowest levels in over a year.
Oil also had a strong performance, driven by concerns over a potential hurricane in the Gulf of Mexico, which raised fears about disruptions to production and refining in the U.S. Gulf Coast.
FX Market Behavior: U.S. Dollar vs. Major Currencies
The U.S. dollar started the day on a strong note, recovering from Friday’s selloff.
It gained traction during the European session but lost some momentum as U.S. markets opened, possibly due to increased risk-taking reducing demand for the safe-haven currency.
The USD experienced sharp declines near the London close but managed to recover, ending the day higher against most major currencies, except for the Canadian dollar, which outperformed.
Upcoming Potential Catalysts on the Economic Calendar:
- Germany's final CPI at 6:00 am GMT
- U.K. jobs reports at 6:00 am GMT
- Japan preliminary machine tool orders at 6:00 am GMT
- Italy industrial production at 8:00 am GMT
- BOE member Sarah Breeden's speech at 11:00 am GMT
- BOJ Governor Macklem's speech in London at 12:10 pm GMT
- FOMC member Michael Barr's speech at 2:00 pm GMT
- FOMC member Michelle Bowman's speech at 4:15 pm GMT
- U.S. Presidential debate between Trump and Harris at 1:00 am GMT (Sept 11)
European session traders can expect a busy day with Germany releasing its final August inflation numbers and the U.K. reporting its latest employment data.
In the U.S., central bank officials will be in focus, with speeches from BOJ, BOE, and FOMC members.
Be on the lookout for headlines that could impact market positioning and central bank policies!
