US Markets Drive Higher Ahead of Fed – Nasdaq Up 1%
US stock markets pushed higher once again in trading yesterday, as investors remained unfazed by the expected rate cut from the Federal Reserve. Meanwhile, gold reached new historic highs. The Dow gained 0.58% on the day, trailing the more tech-focused S&P and Nasdaq, which closed the session up 0.75% and 1%, respectively. Treasury yields crept up but stayed near recent lows, with the 2-year yield rising 0.4 basis points to 3.649% and the 10-year adding 2.6 basis points to 4.681%. The dollar took a hit, losing 0.52% on the day, as the euro rallied despite a 25-basis-point cut from the ECB. Oil prices also edged higher, with Brent up 2.21% to $72.17 and WTI up 2.72% to $69.14, as traders monitored Tropical Storm Francine in the Gulf of Mexico. The standout move came in gold, which surged to a fresh all-time high of $2,560 and saw a further uptick in early Asian trading, reaching another new peak at $2,562.66.
Markets Realigning Ahead of the Fed
Global financial markets are undergoing a degree of realignment ahead of next week’s Federal Reserve meeting, with some moves catching investors off-guard. The dollar saw significant selling pressure yesterday, despite recent data prints from the US coming in stronger than expected. Both the CPI and PPI figures marginally exceeded forecasts, yet the greenback faced heavy selling in yesterday’s trading session. Some of the move can be attributed to a more hawkish-than-expected ECB following their rate cut, which spurred a strong rally in the euro. Meanwhile, the surge in gold appeared to clear out weaker stops just above the previous all-time high. From a dollar perspective, the market is now pricing in a smaller 25-basis-point cut next week, which has led to the unexpected dollar sell-off. Traders are now bracing for increased volatility in the final few trading sessions this week and early next week, ahead of Wednesday’s key Fed announcement.
Quiet Calendar Day Ahead, but Volatility Expected
The macroeconomic calendar is relatively light for today’s trading sessions, though traders are anticipating further market moves after a busy few days. Potential rate updates from China will keep market participants alert during the Asian session, as they continue to digest the overnight moves from the US. The London session is expected to be quieter, with only lower-tier data scheduled for release. However, more market activity is anticipated later in the day, as New York re-enters the fray. The Preliminary Michigan Consumer Sentiment and Inflation Expectations reports are due for release and will offer some insight into the general market mood, but most expect to see flow-driven moves later today. Traders will also keep an eye on China’s large data drop over the weekend, which includes key figures on Industrial Production and Retail Sales. Any sharp deviations from estimates could trigger volatility at Monday’s open.
