FX168 Financial News Agency (Asia Pacific) Tuesday (September 10th) global stock markets stabilized and failed to gain momentum from the rebound on Wall Street, as concerns about economic growth slowdown hit investor sentiment, causing oil prices to fall.
MSCI Global Index remained basically flat, reflecting the moderate rise in the European market, with the STOXX 600 Index rising by 0.2%.
US equity index futures remain stable as the market enters a critical period. The US will release key inflation data on Wednesday, followed by interest rate decisions on both sides of the Atlantic.
The S&P 500 Index futures have not changed much, after the index rose by 1.2% on Monday, marking the worst start to the month since 1953. Benchmark bond yields have risen for the second consecutive day, while the dollar has retained its gains from Monday.
Due to Huawei's three-panel smart phone stealing the spotlight from Apple's new iPhone and other products, the stock price of Apple's new tablet fell by more than 1% in pre-market trading.
The EU's competition regulators have demanded that Apple pay Ireland 13 billion euros (14.34 billion US dollars) in back taxes. This is part of the EU's crackdown on private deals between EU countries and multinational companies. Apple lost its battle with the EU competition regulators. Most other large and growth stocks also declined.
Wall Street's main stock indices recorded gains of over 1% on Monday, as investors looked to buy on the dip. The previous week saw a sharp drop in the stock market due to concerns about the health of the US economy caused by rising interest rates.
The market is waiting for US CPI.
The focus this week is still on the August inflation data released on Wednesday, which may provide more clues about whether the Federal Reserve will cut interest rates by 50 basis points next week. CPI data may show a slight slowdown in overall data to 2.6% year-on-year, while staying unchanged at 0.2% on a month-on-month basis. The Producer Price Index will be released on Thursday.
"Inflation data has been very important in the past few months, but this time it may have a smaller impact. The market is already firmly belief that price pressure is falling. More importantly, the expectation trend of the U.S. economy and whether economic activity can continue or slow down," said Investec's Shaw.
"If there is a significant change in inflation data, pricing of rate cuts may change," said Jun Bei Liu, portfolio manager at Tribeca Investment Partners. "Currently, the market has been quite aggressive in pricing for the second half of this year, so this may further open up the volatility we have seen in the past few weeks."
Investors expect the Federal Reserve to cut interest rates quickly in the coming months, as last week's U.S. employment report depicted a slowing labor market.
"The market is now basically in a state of vigilance for a hard landing, and we are seeing the return of the sentiment of 'good news is good news,'" said Philip Shaw, chief economist at Investec.
Just two weeks ago, the stock market was at historic highs as the market expected the Federal Reserve to provide new stimulus measures by lowering borrowing costs. However, with the significant slowdown in the labor market, shrinking manufacturing activity, and declining inflation, market sentiment has changed.
According to CME's FedWatch Tool, the money market believes there is a 73% chance of a 25 basis point interest rate cut by the Federal Reserve and expects a total monetary policy easing of 100 basis points by the end of 2024.
"The Federal Reserve is walking a tightrope. Larger rate cuts may boost demand, but there is also the risk of inflation, especially when there is a decrease in job vacancies and wages continue to rise," said Luca Santos, forex analyst at ACY Securities.
Political risks in the US election
In addition, political risks in the United States have once again become the focus. Former President Trump and Vice President Kamala Harris will debate later on Tuesday, and the two will engage in intense competition leading up to the presidential election on November 5th.
According to Goldman Sachs data, as the November 5th election approaches, many hedge funds have closed their positions and prepared cash to cope with future volatility.
Prior to the debate between Harris and Trump, the Cboe Volatility Index (VIX) hovered around 20. Compared to the average index of 14.8 in 2024, this indicates an increased demand for protecting stock volatility.
According to Bank of America data, the VIX typically rises by about 25% between July and November in election years, as investors pay more attention to the impact of candidates' policy proposals on the market.
"Due to the presence of a brand-new Democratic candidate at the literal end of the last presidential debate, I do expect some volatility," said Amy Wu Silverman, Head of Derivatives Strategy at RBC Capital Markets, in a report.
Forex market
In terms of currency, the US dollar rose 0.24% against the Japanese yen to 143.53 yen. The British pound rose 0.1% to $1.3082, as UK data showed a slowdown in wage growth from March to July, further supporting expectations of further interest rate cuts by the Bank of England.
The euro remained flat at 1.1037 against the US dollar, and the upcoming European Central Bank policy meeting later this week is also influencing risk appetite. It is expected that the European Central Bank will cut interest rates for the second time this year at the meeting on Thursday to address weak economic conditions.
Morgan Stanley predicts that as the European Central Bank increases its policy easing measures, the euro will reach parity with the US dollar within a few months. The bank expects the euro to fall to around $1.02 by the end of the year, a decrease of about 7% from its current level of $1.1037.
This forecast is the most bearish view in the Bloomberg survey, with the consensus expectation in the survey being that the euro will rise to $1.11 by the end of the year. This forecast is based on the expectation that the European Central Bank will continue to cut interest rates at the next three meetings and may have a 50 basis point rate cut.
commodity equity index
Oil has fallen nearly 20% in the past two months due to concerns about global energy demand, and fell 0.5% on Tuesday to $71.50 per barrel.
Copper futures fell 0.1% to $9,090 per tonne, while iron ore futures fell 0.7% to $91.15 per tonne.