12/08/2024 Daily Reports
Global equities ended a volatile week unchanged, recovering from an early sell-off as confidence grew that inflation is cooling, which could lead to Federal Reserve rate cuts. On Wall Street, major indexes rebounded from a sharp Monday drop, though they remained within a recent trading range, reflecting ongoing investor uncertainty about the U.S. economy and geopolitical risks. The CBOE Volatility Index, a key measure of market fear, fell sharply, suggesting that investor anxiety had eased by the end of the week.
Key Points:
Global Equities: A global equities index ended the week unchanged, recovering from a significant sell-off earlier in the week, while the dollar dipped slightly, and oil prices rose due to supply concerns in the Middle East.
Fed Rate Cut Hints: Federal Reserve policymakers expressed confidence that inflation is cooling, boosting market sentiment and contributing to the stock market’s recovery.
Wall Street Performance : The main U.S. stock indexes closed higher on Friday after a volatile week, with the S&P 500 rebounding from Monday’s sharp decline.
Trading Range and Investor Sentiment: Investors remained cautious, with the S&P 500 unable to break out of its recent trading range, reflecting uncertainty about the U.S. economy and potential geopolitical risks.
Volatility Index: The CBOE Volatility Index, Wall Street’s “fear gauge,” dropped significantly, indicating a calming of investor nerves after spiking earlier in the week.
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Asian Markets: A calm start with Japan on holiday for Mountain Day. Last week’s sharp drop in the Nikkei weighed on global markets, though Tokyo futures suggest a potential 400-point rebound if markets were open. Taiwan stocks led gains with a 2% rise, while Wall Street futures remain steady.
Currency Movements: The dollar hovers around 147.00 yen, stabilizing after recent volatility in the yen carry trade. IMM data shows a significant reduction in short USDJPY positions, indicating less bearish sentiment on the yen.
U.S. Rates Outlook: Treasury futures are steady, with Fed fund futures pricing in a 49% chance of a half-point rate cut in September. Fed officials, however, have downplayed the likelihood of an inter-meeting cut, despite acknowledging that inflation remains above target.
Key Data Ahead: U.S. consumer price data on Wednesday will be closely watched, with expectations of a slight decline in core inflation to 3.2%. Thursday’s July retail sales could also surprise, with a wide forecast range of 0.0% to +0.9%. Earnings reports from Walmart and Home Depot will provide further insights into consumer demand.
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Oil Prices Extend Gains for Fifth Session, Boosted by Middle East Tensions
On Monday, oil prices increased for the fifth day in a row, maintaining the over 3% gains from the previous week. This rise was supported by reduced concerns about a U.S. recession and ongoing geopolitical tensions in the Middle East.
On Saturday, the Israeli military action in Gaza escalated with an airstrike on a school compound, resulting in at least 90 fatalities according to the Gaza Civil Emergency Service. However, Israel contested this death toll as exaggerated. Additionally, Hamas expressed skepticism about participating in new ceasefire negotiations on Sunday.
Last week, Brent crude oil prices rose by over 3.5%, while WTI crude increased by more than 4%, buoyed by positive economic data and growing expectations of a potential U.S. interest rate cut.
