Credits: Associated Press
Global stocks edged up on Monday, kicking off a week filled with major earnings reports and crucial central bank meetings. The spotlight is on potential interest rate cuts by the United States and the UK, while Japan might increase borrowing costs as a step toward monetary “normality.”
Oil prices saw a slight uptick due to escalating tensions in the Middle East following a rocket strike in the Israeli-occupied Golan Heights, which Israel and the United States attributed to the Lebanese armed group Hezbollah.
Key economic indicators are also due this week, including the U.S. jobs report for July, critical surveys on U.S. and global manufacturing, and eurozone gross domestic product and inflation data.
“U.S. markets are approaching crunch time. This coming week could very well set the path for markets over the near term,” stated Matt Britzman, senior equity analyst at Hargreaves Lansdown.
Adding to the week’s economic activity, the U.S. Treasury will reveal its bond sale plans for the quarter, while China’s politburo meeting could potentially introduce more stimulus measures following unexpected rate cuts last week.
After a favorable June inflation report, markets are speculating that the Federal Reserve will signal a September rate cut during its policy meeting on Wednesday. Futures are fully priced for a quarter-point reduction and suggest a 12% chance of a 50 basis point cut, with 68 basis points of easing anticipated by December.
“The FOMC is set to hold steady but is likely to revise its statement to hint that a cut at the following meeting in September has become more likely,” wrote analysts at Goldman Sachs in a note. “We now see the risks to the Fed path as tilted slightly to the downside of our baseline of quarterly rate cuts, though not quite as much as market pricing implies.”
The Bank of Japan also meets on Wednesday, with markets indicating a 70% likelihood of a 10 basis point rate hike to 0.2%, and some possibility of a 15 basis point increase. In contrast, investors are uncertain about the Bank of England’s move in its Thursday meeting, with futures showing a 51% chance of a rate cut to 5%.
