After the risk appetite rebounded last week, global stock markets were less volatile during the European trading session on Monday (August 19) as traders waited for signs of potential interest rate cuts from the Federal Reserve. The US dollar fell and the Japanese yen was strong. The market will focus on Federal Reserve Chairman Powell's speech at the Jackson Hole central bank meeting this week, which is expected to pave the way for a rate cut in September.

The MSCI global equity index rose around 0.2%. Meanwhile, after recording the largest single-week increase in three months, European stocks fluctuated on Monday. The pan-European Stoxx 600 index fluctuated between -0.1% and 0.1% in early trading and is currently up 0.1% at 512.05 points.

European defense company stocks have suffered a heavy blow.

Defense stocks fell, with Rheinmetall, BAE Systems, Saab, Thales, Leonardo and Dassault Aviation's share prices falling 1.6% to 6%. Earlier reports said Berlin would limit military aid to Ukraine due to budget constraints.

The European benchmark index has regained all the lost ground in recent sales and returned to 511 points on August 1st.

"The consolidation phase will last a few days... and at this point, indecision is quietly returning. Now we're back to assessing market conditions and the impact of these factors," said Daniela Hathorn, senior market analyst at Capital.com.

Nasdaq 100 index futures dominated by technology stocks fell 0.3%, while S&P 500 index futures remained unchanged.

After restoring risk appetite last week, traders started the week cautiously with the S&P 500 index approaching record highs. Some buyers reappeared after the plunge on August 5th, helping major US stock indices reclaim more than half of their summer losses. "The market has warmed up and now feels more stable," said Louise Dudley, portfolio manager for Federated Hermes global equities, in an interview with Bloomberg Television. "In the medium term, the market is volatile and we will definitely seek to take advantage of some of the price fluctuations. Some large-cap stocks still offer top growth opportunities."

The market is focused on Powell's speech.

The key event of this week is scheduled for Friday, when Federal Reserve Chairman Jerome Powell is expected to provide new insights into the direction of US monetary policy at the Jackson Hole Economic Symposium in Wyoming.

Paul O'Neill, chief investment officer at Bentley Reid Wealth Management, said, "All eyes are on this Friday. We will look for any signs of interest rate cuts. The next question is, how big will the rate cut be?"

The futures market has fully priced in a 25 basis point move and suggests a 25% chance of a 50 basis point cut, largely based on the results of the next employment report.

Seth Carpenter, chief global economist at Morgan Stanley, wrote: "We expect Powell to discuss the Fed's medium-term strategy."

O'Neill, chief investment officer at Bentley Reid Wealth Management, said, "All eyes are on this Friday. We will look for any signs of interest rate cuts. The next question is, how big will the rate cut be?"

The futures market has fully priced in a 25 basis point move and suggests a 25% chance of a 50 basis point cut, largely based on the results of the next employment report.

Goldman Sachs lowered its probability of a US economic recession in the next year from 25% to 20% over the weekend, citing retail sales and jobless claims data from last week. "If the August employment report looks pretty good, we may further reduce the probability of recession to 15%", said Jan Hatzius, the bank's chief economist, in a report to clients on Saturday.

Kashkari, a member of the Federal Reserve, said recently that he was open to rate cuts at the next meeting because the possibility of an overly soft labor market was increasing. "The balance of risks has changed, so it is appropriate to discuss a possible rate cut in September," Kashkari said in an interview. Kashkari said in June that it might not be necessary to cut interest rates before the end of the year. But the rise in the unemployment rate from 3.7% at the beginning of the year to 4.3% in July indicates a greater risk of economic slowdown.

Kashkari talked about interest rate cuts.

Recently, Federal Reserve member Kashkari said he was open to rate cuts at the next meeting because the possibility of an overly soft labor market was increasing.

"The balance of risks has changed, so it is appropriate to discuss a possible rate cut in September," Kashkari said in an interview. Kashkari said in June that it might not be necessary to cut interest rates before the end of the year. But the rise in the unemployment rate from 3.7% at the beginning of the year to 4.3% in July indicates a greater risk of economic slowdown.

Kashkari said that he wouldn't even discuss lowering interest rates now if there is no evidence of weakness in the labor market and if the unemployment rate remains within the range of 3.7% to 3.8%. Instead, the situation has changed because inflation is making progress and there are some worrying signs in the labor market. However, Kashkari still believes that there is no reason to cut rates more than 25 basis points because the layoff rate is still low and the number of people applying for unemployment benefits has not shown a significant deterioration.

The Federal Reserve is not the only institution considering easing policies. The Swedish central bank is expected to cut interest rates this week, with a cut of up to 50 basis points.

In addition, investors are expecting the release of purchasing managers' index (PMI) data for France, Germany, the United Kingdom, and the Eurozone later this week.

The Japanese yen surged more than 100 points.

In Asia, the Japanese yen led the G10 currencies higher as the market waits for Bank of Japan Governor Haruhiko Kuroda's hints on August 23. Kuroda is scheduled to attend a special parliamentary meeting this week to discuss the rate hikes that triggered global market turmoil last month.

On Monday, the Japanese yen rose for a second straight trading day, rising over 1% against the dollar to about 145, while the Japanese stock market fell for the first time in six days.

This rebound occurred against the backdrop of overall weakness in the dollar, as investors were nervous about Bank of Japan Governor Haruhiko Kuroda's speech to parliament on Friday and Federal Reserve Chairman Jerome Powell's speech at the Jackson Hole meeting on the same day.

The market is highly nervous about Kuroda's hints on the Bank of Japan's rate hike path, especially after Deputy Governor Masayoshi Amamiya took a more dovish stance in the market turmoil after the policy meeting on July 31. Political uncertainty in Japan has also intensified market concerns, as Prime Minister Shinzo Abe has said he will not seek re-election as leader of the Liberal Democratic Party in September.

Major investors, such as Vanguard Group, are still betting that Japan will further raise interest rates in the coming months, even though market expectations for further tightening have plummeted this year.

"It seems that some investors are still not giving up on betting on a rate hike by the Bank of Japan," said Hideki Shibata, senior interest rate and forex strategist at Tokai Tokyo Intelligence Laboratory Co. "Before the speeches of the heads of the US and Japanese central banks, investors may try to buy yen against the dollar."

"The dollar continues to weaken as concerns about a slowdown in the US economy ease, but some people still question whether the economic indicators are strong enough," said Go Ohara, director of foreign exchange trading at Mitsubishi UFJ Bank Ltd. "During overseas trading hours, the dollar may fall further against the yen."

Oil prices fell for the fourth session in five as traders focused on US-led efforts to reach a ceasefire in the 10-month-old Gaza conflict, while the Russia-Ukraine conflict escalated.