Global stock markets were mixed on Monday, with investors still wondering about the extent of the first rate cut by the US central bank (Fed), expected next week. In Europe, after a week of losses, the main European financial markets were trying to move forward: the Paris Stock Exchange gained 0.42% around 07:30 GMT, London 0.64%, Frankfurt 0.48% and Milan 0.57%. Uncertainty has gripped the markets since the end of last week following the publication of the US employment report for August, which was considered mixed.
“The August employment reports, long awaited by markets, did not provide definitive answers on the extent of the slowdown in the US labor market. This leaves open the question of whether the Fed will begin cutting rates next week with a classic 25 basis point cut, or a more aggressive 50 basis point cut.”summarizes Xavier Chapard, strategist at LBP AM. However, “The week following the publication of employment figures is often quiet”warn Deutsche Bank analysts. The debate over the extent of the Fed’s rate cut “could bring a lot of volatility” in the markets, they added.
Unlike Europe, Asian stock indices are clearly down. The Hong Kong Stock Exchange fell by 1.85% in recent trading, Shanghai fell by 1.06% and Shenzhen by 0.83%. In Japan, the Tokyo Stock Exchange fell by 0.48%. “This is partly because they are reacting to the US jobs figures, but the economic data from the continent released overnight was also disappointing.”Deutsche Bank analysts point out. “For example, Japan’s second-quarter GDP growth was revised down to +0.7%, from an initial estimate of +0.8%.” and in China, “Inflation was lower than expected in August”they detailed.
While most Western economies have been struggling with high inflation for months, China is trying to avoid a return to deflation, from which it only emerged in February. On the investor agenda this week, all eyes will be on the publication of US inflation on Wednesday. However, “Given the Fed’s high confidence in disinflation right now, it would take a big surprise for this to have an impact.” on its monetary policy decision, believes Xavier Chapard.
Yen weighs on Japanese values
On the foreign exchange market, fears of the yen strengthening against the US dollar persisted, weighing on export-related stocks, particularly in the automotive sector, penalizing shares of Toyota (-3.19%), Nissan (-1.66%) and Honda (-1.21%). After a fall of more than 3% in early trading, the trend was moderating on the foreign exchange market around 07:15 GMT: the yen lost 0.71% against the dollar, to 143.34 yen and the Japanese currency fell 0.45% against the euro, to 158.47 yen.
Fears of a weakening U.S. labor market also led to a selloff in semiconductor stocks in Japan. Shares of Disco Corp fell 3.11 percent, while Tokyo Electron, one of the industry’s top performers on the Japanese stock market, fell 2.27 percent.
Oil is moving forward
“Brent crude oil prices ended the week at $71.06 per barrel, their lowest closing level since December 2021, and over the past week, Brent fell 9.82%, posting its worst weekly performance since October 2023.”Deutsche Bank analysts point out. On Monday around 07:15 GMT, the price of a barrel of American WTI increased by 1.36% to 68.59 dollars and that of North Sea Brent gained 1.24% to 71.94 dollars. Bitcoin gained 0.69% to 54,755 dollars.
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