Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., August 15, 2023. REUTERS/Brendan McDermid/File Photo Acquire License Rights
A look ahead for the day ahead in the US and global markets by Mike Dolan
After a stifling August so far, global markets felt some relief on Tuesday as the month’s bond tightness eased somewhat – investors are now awaiting signals from Wyoming and distracted by hopes of a repeat of the AI madness of earlier in the year.
There was little to trigger the rebound, other than 10-year Treasury yields retreating from their 16-year peak of 4.36% ahead of Thursday’s annual Federal Reserve meeting in Jackson Hole — at the there are hints of longer-term policy considerations by the Fed.
No news turned out to be good news in China – where the relentless stream of negativity surrounding the country’s ailing economy and ailing real estate sector seemed to have dried up as President Xi Jinping attended the BRICS summit in South Africa. The onshore yuan stabilized on supportive measures by Chinese state banks in the swap market and Chinese equities (.CSI300) recovered from yearly lows.
But the global recovery was first visible on Wall Street on Monday, as tech stocks rallied ahead of chip giant Nvidia (NVDA.O)’s quarterly results on Wednesday, amid hopes that some are refocusing on the artificial intelligence boom that’s been thriving already sent Nvidia stock up 220%. for the current year. The Nasdaq 100 (.NDX) posted its first gain in a week and posted its biggest gain of the month, up 1.6%, and the S&P500 (.SPX) also posted its first gain in five weeks.
Overall, the MSCI multi-country index (.MIWD00000PUS) was on track for its first consecutive daily gains in August on Tuesday. And S&P futures rose faster than the bell.
Although government bond yields made fresh cycle highs in Asian trading, there was some demand at those levels as investors await Friday’s Jackson Hole event and Fed Chair Jerome Powell’s keynote address there. In line with the drop in yields, the dollar (.DXY) also weakened again.
Given the recent strength in the economy, futures markets now see a 50/50 chance of another rate hike by the Fed next month. However, the focus this week could be on how long interest rates will remain at these levels and whether estimates of long-term sustainable interest rates have risen.
There were background concerns about the impact of this recent fall in bond prices and lending rates on US banks.
Credit ratings firm S&P Global lowered ratings and revised its outlook for several middle-market US banks late Monday after Moody’s made a similar move, warning that funding risks and weaker profitability were likely to test the sector’s credit strength.
And US government spending cuts are also likely to return to the spotlight in Congress next month, with the possibility of a government shutdown unlikely as Republican factions push for more cuts beyond the debt ceiling hike agreed in May.
Elsewhere, investors were excited about SoftBank’s (9984.T) chip designer Arm’s plans for the biggest IPO of the year — even after the company reported a 1% drop in annual sales.
And Call of Duty maker Activision (ATVI.O) is set to sell its non-European streaming rights to Ubisoft Entertainment (UBIP.PA) in the biggest video game deal yet, after UK regulators and potential owner Microsoft (MSFT.O ) said on Tuesday.
Events to watch out for on Tuesday:
* US Existing Home Sales July, Richmond Fed Business Survey August, Philadelphia Fed Services Survey
* Thomas Barkin, Richmond Federal Reserve President, Austan Goolsbee, Chicago Fed President, Michelle Bowman, Governor of the Fed Board
* US corporate earnings: Lowe’s, Medtronic
* BRICS Summit in Johannesburg. Chinese President Xi Jinping meets with African President Cyril Ramaphosa in Pretoria
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By Mike Dolan, edited by Christina Fincher, [email protected]. Twitter: @reutersMikeD
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