empty
22.08.2024 11:06 AM
Holding their breath: Wall Street awaits Fed decision, other big global events

This image is no longer relevant

Investor expectations: Stocks frozen, await Fed decision

Global stock markets paused their gains on Wednesday, stabilizing after a long rally that took them to recent record highs. Investors are awaiting confirmation that the US Federal Reserve will decide to cut interest rates, in line with their expectations.

The minutes of the Fed's July 30-31 meeting show that officials are leaning toward lowering rates at the upcoming September meeting. Fed Chairman Jerome Powell is expected to reiterate the central bank's commitment to easing policy at its annual conference in Jackson Hole, Wyoming, on Friday. The move comes after the bank successfully quelled the worst surge in inflation in 40 years.

Oil and Gold: Contrasting Trends

Oil prices fell while gold held its high, hovering near the record highs it hit on Tuesday, as the dollar weakened amid expectations of interest rate cuts.

Wall Street and Global Markets: Steady Gains

On Wall Street, the indices showed modest gains, with the Dow Jones Industrial Average (.DJI) up 0.13% to 40,889, the S&P 500 (.SPX) up 0.42% to 5,620, and the Nasdaq Composite (.IXIC) up 0.57% to 17,918.

The MSCI All Country (.MIWD00000PUS) also showed positive dynamics, adding 0.4% and almost reaching its July record. Since the beginning of the year, it has gained an impressive 13.9%.

European Markets: New Peak on the Horizon

The STOXX (.STOXX) index of 600 leading companies in Europe rose 0.3%, moving closer to its all-time high set on June 7.

Market Volatility: Investor Sentiment Under Pressure

World stocks have been volatile this month, as investors worried about U.S. employment data, which has heightened fears of a possible recession in the world's largest economy.

However, the pessimism has since given way to hopes for a soft landing, which investors see as an opportunity thanks to the expected cut in U.S. interest rates, which could begin as early as September.

Labor Market: Key Factor for the Fed

The U.S. Labor Department reported on Wednesday that job creation was significantly lower than initially expected for the period through March. The news has heightened the Federal Reserve's concerns about the health of the labor market, which in turn affects monetary policy going forward.

"The labor report confirms the futures market's assessment that the Fed is likely to cut rates at its September 18 meeting," Quincy Crosby, chief global strategist at LPL Financial, said in an email.

Futures and Bonds: Rate Cut Expectations

Futures markets have already priced in the likelihood of a 25 basis point rate cut next month, as well as a one-in-three chance of a 50 basis point cut. A 100 basis point cut is expected this year, with another 100 basis points expected next year.

U.S. Treasury yields also fell. The benchmark 10-year note shed 2.3 basis points to 3.795%, down from 3.818% late last night. The yield on two-year bonds, which is more sensitive to interest rate expectations, fell by 6.9 basis points, reaching 3.9305% from 4% late Tuesday.

Waiting for a decision: markets frozen

Thus, global markets continue to wait. Investors are focused on the upcoming Fed meeting in September, where the further course of monetary policy will be decided. Any new data on the state of the US economy could significantly affect this course, and therefore, global financial markets.

No Recession Scenario: The Fed's New Approach

Global markets find themselves in a unique situation where the prospect of a significant rate cut is not accompanied by recession risks. This is in stark contrast to five of the last seven rate-cutting cycles, when lower borrowing costs were accompanied by an economic slowdown, according to Ross Yarrow, managing director of U.S. equities at investment bank Baird.

"If we can get to a point where the Fed cuts rates, inflation comes down, and employment stays high, that would be a very positive outcome," Yarrow said. He added that such an environment could create a positive outlook for equity markets to continue to rally.

Asian Markets: Mixed Performance

Asian markets were less optimistic. The MSCI Asia-Pacific Ex-Japan Index (.MIAPJ0000PUS) fell 0.3%. In Hong Kong, the Hang Seng Index (.HSI) fell 0.7%, with JD.com (9618.HK) contributing significantly to the decline, falling 8.7% after Walmart (WMT.N) decided to sell its large stake in the company.

Japan's Nikkei (.N225) also fell 0.3%, pausing its recovery at 38,000, which had become resistance after the August collapse.

FX and Gold: Dollar Under Pressure

The weaker dollar helped gold, which neared record highs, while strengthening the yen, which has returned to 145.135 per dollar from a multi-year low hit last month.

The euro also strengthened, gaining about 3% in August to reach $1.115, its highest since December last year.

Gold and Oil: Mixed Movements

Gold prices continued to hover around $2,510 per ounce, remaining close to the record highs reached on Tuesday. At the same time, oil prices went down again: US crude oil fell by 1.69% to $71.93 per barrel, while Brent fell by 1.49% to $76.05 per barrel.

Looking Ahead: What's Next?

Overall, markets remain awaiting further actions by the Fed and their impact on the global economy. Whether the US economy can avoid a recession amid rate cuts remains an open question, but current investor sentiment is increasingly leaning towards an optimistic scenario.

Retail Sector on the Rise: JD Sports' Success

The retail sector showed strong growth, leading the leaderboard amid a significant increase in JD Sports (JD.L) shares. The UK sportswear retailer rose 5.3% after reporting a strong improvement in core sales in the second quarter, spurring investors.

Energy under pressure as oil prices fall further

The energy sector was among the laggards, falling 0.6% as oil prices fell for a fifth straight session. Investors are concerned about a possible slowdown in global oil demand, putting pressure on companies in the sector.

Key data ahead: PMIs and consumer confidence

Markets are focused on the upcoming flash purchasing managers' index (PMI) data for France, Germany, the UK and the eurozone, due between 07:15 and 08:30 GMT. These figures will help to gauge the current state of the region's economies.

Eurozone consumer confidence data is also due out today at 14:00 GMT. Later in the day, US PMI and initial jobless claims data will be released, which could have a significant impact on the market.

Key Market Moves: Aegon and Deutsche Bank

Among individual stocks, Aegon (AEGN.AS) was a notable loser, falling 4% after the Dutch insurer reported a decline in its key capital generation figure for the first half of the year. This caused concern among investors and led to a sell-off.

Meanwhile, Deutsche Bank (DBKGn.DE) shares rose 2.5% after the bank reached a settlement with more than half of the plaintiffs who had accused it of underpayment. The progress was welcomed by the market, which was reflected in the bank's share price rising.

Looking Ahead: Key Data Expectations

Investors continue to closely monitor upcoming economic data, which could be key indicators for future market developments. Particular attention will be paid to the PMI and consumer confidence indicators, which will provide an indication of the current state of the European economy and may influence sentiment in other regions.

Thomas Frank,
Analytical expert of InstaForex
© 2007-2025
Summary
Urgency
Analytic
Thomas Frank
Start trade
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

Stock market on edge as rally hangs on Nvidia report

Earnings from AI market leader Nvidia are due Wednesday. Stocks broadly recovered on Friday after comments from Fed Chair Powell. Nikkei rises, Wall Street futures slip ahead of Nvidia news

09:34 2025-08-25 UTC+2

Stocks on a tightrope as Nvidia earnings call to decide whether rally will continue

AI leader Nvidia results due Wednesday Stocks broadly rebound on Friday after Fed's Powell's comments Nikkei rises, Wall Street futures fall ahead of Nvidia news Market bids 84% chance

Thomas Frank 05:53 2025-08-25 UTC+2

US Market News Digest for August 22

US stock indices ended the session in the red as traders exercised caution ahead of a highly anticipated speech by Federal Reserve Chair Jerome Powell. The S&P 500 fell

Ekaterina Kiseleva 14:37 2025-08-22 UTC+2

Dow, Nasdaq, S&P end lower despite housing gains

Indices down: S&P - 0.4%, Nasdaq - 0.34%, Dow - 0.34% Walmart shares fall after quarterly profit misses expectations US existing home sales unexpectedly rise in July Coty shares fall

Thomas Frank 11:18 2025-08-22 UTC+2

Bitcoin drops below $113,000, spooking market — bulls and bears locked in stalemate

So far, there's no outright confrontation between crypto bulls and bears, but analysts point to growing tension. The unease is largely tied to Bitcoin's shaky performance, which has been sliding

Larisa Kolesnikova 15:17 2025-08-21 UTC+2

US Market News Digest for August 21

US stock indices ended mixed on Wednesday: the S&P 500 slipped 0.24%, while the Nasdaq 100 lost 0.67%, as investors adopted a cautious stance ahead of the Federal Reserve's symposium

Ekaterina Kiseleva 14:21 2025-08-21 UTC+2

Nasdaq and S&P 500 Fall as Investors Look Beyond Tech for Growth

On Wednesday, the Nasdaq and S&P 500 ended the session in negative territory as investors trimmed positions in technology shares and shifted funds toward more defensive sectors, while awaiting comments

Thomas Frank 09:21 2025-08-21 UTC+2

US Market News Digest for August 20

NVIDIA shares fell 3.5%, disrupting the recent positive trend in the stock market and dragging down the S&P 500 and Nasdaq 100. Investors are now looking ahead to Jerome Powell's

Ekaterina Kiseleva 12:50 2025-08-20 UTC+2

Tech Slump: Nasdaq Loses 1.46%, But Home Depot Surprises with Gains

Magnificent Seven Stocks Fall Home Depot Gains After Maintaining Full-Year Guidance Intel Gains Amid SoftBank Investment U.K. Consumer Price Inflation 3.8% for 12 Months Through July Jackson Hole Symposium, Powell

Thomas Frank 11:03 2025-08-20 UTC+2

Nikkei plunges after SoftBank deal; Dayforce shares soar. What's next?

Three major US stock indices closed with minor changes on Monday as investors awaited quarterly earnings reports from top retailers. Besides, they are anticipating the Federal Reserve's annual Jackson Hole

11:38 2025-08-19 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.