Euro, Hong Kong dollar, US dollar, Japanese yen, pound and Chinese 100 yuan banknotes are shown in this illustration dated January 21, 2016. REUTERS/Jason Lee/Illustration/File Photo
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A look ahead for the day ahead in the US and global markets by Mike Dolan.
Global central banks are dispersing again, propelling a resurgent US dollar to a nearly two-year high against the Chinese yuan and back through parity against the euro.
While the Federal Reserve faces the unenviable task of sobering up heady summer markets at its annual conference in Jackson Hole this week, China’s central bank went in the opposite direction on Monday by cutting interest rates. Continue reading
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Europe’s policymakers are caught in the middle with sizzling energy prices fueling inflation and interest rate fears as well as deepening fears of a winter recession.
Those concerns were underscored by news over the weekend that Russia’s state-owned energy giant Gazprom (GAZP.MM) plans to halt natural gas supplies to Europe for three days later this month, while Bundesbank chief Joachim Nagel said the European Central Bank must hike rates further, itself if a recession in Germany is becoming more and more likely. Continue reading
Although crude oil prices fell slightly on Monday, European benchmark natural gas prices are up another 10% and are now nearly 600% up year-on-year.
With August business sentiment and the minutes of the ECB’s last meeting due later in the week, the euro fell back to parity against the dollar for the first time in over a month, and sterling also slipped lower. Continue reading
US 10-year Treasury yields briefly topped 3% for the first time since July, but bond yields everywhere fell back quickly as equity markets suffered again. European indices fell nearly 2%, Wall St futures were down more than 1% and the VIX volatility index was at its highest level in three weeks.
While markets are still divided on the magnitude of next month’s Fed hike between 50 basis points and 75 bps, they expect Fed Chair Jerome Powell on Friday to warn financial markets against assuming an early halt or reversal of the tightening campaign , and may offer more details on the Fed’s balance sheet cut. Continue reading
But as the inflation picture darkens in Europe, futures and swap markets are also beginning to price in more aggressive rate hikes from the ECB and Bank of England.
On the corporate front, Britain’s Cineworld (CINE.L) said it was considering a possible bankruptcy filing in the United States as the world’s second-largest cinema chain operator struggled with short-term liquidity. Continue reading
Key developments that should give more direction to US markets later on Monday:
* Chicago Fed activity index for July
* US Revenue: Zoom, Palo Alto Networks
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By Mike Dolan, edited by Susan Fenton [email protected]. Twitter: @reutersMikeD
Our standards: The Thomson Reuters Trust Principles.
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