General Market Analysis – 27/08/24

Stocks Drop to Kick off the Week – Nasdaq Down 0.8%

US stock markets fell in trading yesterday as investors continued to assess last week’s developments and rising geopolitical risks in the Middle East. The Dow closed marginally higher, up just 0.07%, while tech stocks retreated, dragging the S&P down 0.30% and the Nasdaq down 0.79%. US Treasury yields held steady after Friday’s decline, with the 2-year yield gaining 1 basis point to 3.923% and the 10-year yield adding just 0.3 basis points to close at 3.810%. The dollar edged higher as major currencies remained near recent highs, with the DXY gaining 0.18% on the day to reach 100.84. The biggest moves were in oil, with Brent climbing 2.70% to $81.15 and WTI jumping 3.18% to $77.21. Gold remained near recent historic highs, closing the day up 0.14% at $2,514 an ounce.

Dollar Remains Under Pressure as Traders Eye Rate Cuts

The US dollar continues to trade near annual lows on the index and against most major currencies, as FX markets anticipate aggressive easing from the Federal Reserve in the coming months. The market is currently pricing in a 25-basis point cut at the September meeting. However, further weak data from the US could shift expectations towards a 50-basis point cut, which could drive the dollar into new ranges against the majors. Key data releases over the next couple of weeks include the PCE Price Index, Non-Farm Payrolls, and the CPI update. Some traders believe that the Fed would need to see at least two, if not all three, of these data points come in weaker than expected to justify a 50-basis point cut.

Another Quiet Calendar Day – Investors Eye Middle East Tensions

Today is another quiet trading day, with very little scheduled to move the markets during the first two sessions. Yen traders will be watching the Bank of Japan’s Core CPI data release late in the Asian session, but sentiment is likely to dominate flows. There is nothing of note in the European session, though traders will be closely monitoring news wires for any updates on the conflict in the Middle East. The New York session brings the first tier 1 data update from the US for the week, with the CB Consumer Confidence data released alongside the Richmond Manufacturing Index figures. Once again, Fed rate cut expectations are expected to remain at the forefront of market focus.

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