12/08/2024 Evening Reports
- US equity futures posted small gains as traders braced for a week of critical economic data, particularly the US consumer price index, which will provide insights into the health of the economy and the Federal Reserve’s interest rate outlook.
- The S&P 500 and Nasdaq 100 futures edged up, while European stocks fluctuated. Despite a recent market rebound, volatility remains a concern, with the VIX index easing from its peak.
- Investor sentiment remains cautious, influenced by mixed signals from Federal Reserve officials and ongoing concerns about the Fed’s ability to manage inflation without triggering a deeper economic slowdown.
- Bond markets are pricing in potential rate cuts, but uncertainties persist, leading to reduced equity allocations. Meanwhile, commodities like oil and gold are closely watched as geopolitical tensions and economic data continue to impact market movements.
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The yen fell against the dollar on Monday, marking a calmer session after last week’s volatility driven by concerns over the U.S. economy and the Bank of Japan’s hawkish stance. The dollar rose 0.7% against the yen and 0.5% against the Swiss franc, as investors weighed the possibility of significant Federal Reserve rate cuts next month amid upcoming U.S. economic data releases. While stronger-than-expected U.S. jobs data led markets to reduce bets on immediate Fed rate cuts, 100 basis points of cuts are still priced in by year-end.
Last week’s market turbulence was largely due to the unwinding of yen carry trades, where investors borrow yen at low costs to invest in higher-yielding assets. This unwinding, triggered by Japan’s intervention and a Bank of Japan rate rise, caused the yen to reach its strongest level since January 2. However, the yen remains down around 4% against the dollar this year.
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Oil Climbs Back Above $80 as Traders Watch for Iran Reprisal
Oil extended its first weekly gain since early July, with traders continuing to monitor Iran’s response to last month’s assassination of a Hamas leader in Tehran, as well as developments in wider markets. Brent climbed above $80 a barrel after rising almost 4% last week, while West Texas Intermediate neared $78. Tehran reiterated Sunday its determination to punish Israel for the killing, as Iranian state media reported that a missile unit of the country’s military was conducting exercises near the Iraqi border.
Gold Advances to Highest in a Week Ahead of US Inflation Data
Gold rose ahead of US economic data due later this week, with traders focused on whether the prints will reinforce bets the Federal Reserve will soon pivot to monetary easing. Rising Middle East tensions have also bolstered gold’s appeal as a haven asset. Gold remains “supported by geopolitical risks and anticipated Federal Reserve rate cuts amid heightened tensions involving Iran, Israel, and Ukraine,” according to a Monday report from Saxo Bank A/S.
