Market Hesitation Amid Global Tensions and Anticipation of Inflation Data: What You Need to Know
By Wayne Cole
SYDNEY (Multibagger) - The world's major share markets exhibited caution on Monday, while the dollar and bond yields dipped ahead of critical inflation data. This data could set the stage for potential rate cuts in the United States and Europe. Meanwhile, Wall Street prepared for earnings announcements from AI giant Nvidia (NASDAQ: NVDA).
Oil Prices Surge Amid Geopolitical Tensions
Oil prices climbed as Israel and Hezbollah exchanged rocket fire and air strikes on Sunday, raising concerns about possible supply disruptions if the conflict escalates. Brent crude rose by 81 cents to $79.83 per barrel as of 0701 GMT, while U.S. crude added 80 cents to reach $75.63 per barrel.
Market Movements
Europe's broad STOXX index remained flat in early trading, while MSCI's broadest index of Asia-Pacific shares added 0.5%. Both S&P 500 and Nasdaq futures were slightly lower in sluggish trade, and UK markets were closed for a holiday.
Nvidia's Earnings: The Market's Next Big Event
Nvidia is set to report its earnings on Wednesday, with market expectations sky-high. The stock has skyrocketed by approximately 150% year-to-date, contributing significantly to the S&P 500's 17% year-to-date gain.
"Nvidia will beat consensus expectations, they always do," said Chris Weston, head of research at broker Pepperstone. "However, if revenue doesn't exceed $2 billion above analysts' consensus, we could see a 'sell the news' event."
For Nvidia to meet investor expectations, it would need to report sales of $30 billion or more and provide guidance for the third quarter at $33 billion or above, Weston added.
Mixed Asian Markets
In mixed Asian stock markets on Monday, Japan was a notable underperformer, with the Nikkei closing 0.66% lower as a stronger yen pressured exporter stocks. The yen has surged against a broadly weaker dollar after Federal Reserve Chair Jerome Powell hinted at policy easing and emphasized the central bank's commitment to a strong labor market.
"The jobs report on September 6 is clearly important as Powell is willing to cut rates to ward off downside risks to employment," noted Tapas Strickland, head of market economics at NAB.
Anticipated Rate Cuts
Data on U.S. personal consumption and core inflation are due on Friday, alongside a preliminary reading on European Union inflation. Analysts generally expect that the data will be favorable enough to allow for rate cuts in September.
Fed fund futures are fully priced for a quarter-point cut at the Sept. 18 meeting, with a 38% chance of a 50 basis point move. The market also projects 103 basis points of easing for this year and another 122 basis points in 2025.
"We continue to expect the FOMC to deliver an initial string of three consecutive 25bp cuts at the September, November, and December meetings," said analysts at Goldman Sachs.
Markets are also fully priced for a quarter-point cut from the European Central Bank next month, with a total of 163 basis points of easing by the end of 2025.
Bond Yields and Currency Movements
Yields on two-year Treasuries fell an additional 2.5 basis points to 3.8872% on Monday, following a nearly 10 basis point drop on Friday. Ten-year yields also declined by 2.5 basis points to 3.7820%. The dollar slid further by 0.53% to 144.685 yen, having fallen 1.3% on Friday. The euro edged down slightly to $1.1181, but remained just off a 13-month high. The Swiss franc firmed to 0.84655 per dollar.
A softer dollar, combined with lower bond yields, supported gold prices at $2,515 an ounce, near an all-time peak of $2,531.60.
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Breaking It Down: What This Means for You
- Inflation Data and Rate Cuts: The upcoming inflation data in the U.S. and Europe could lead to rate cuts, which usually make borrowing cheaper. This could be beneficial if you're looking to take out loans or mortgages.
- Geopolitical Tensions: The conflict between Israel and Hezbollah has pushed oil prices up, which could lead to higher fuel costs. Keep an eye on your transportation and heating expenses.
- Nvidia's Impact on the Market: Nvidia's performance can significantly influence the stock market. If their earnings are lower than sky-high expectations, it could lead to a broader market sell-off.
- Bond Yields and Currency Movements: Lower bond yields and a softer dollar can impact your investments and savings. Gold prices rising usually indicates a move towards safer assets.
Understanding these factors can help you make informed decisions about your investments and financial planning. Even if you're not a market expert, knowing these basics can help you navigate economic changes that affect your daily life.