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At Monday's close, the Dow Jones (US30) Index was down 0.36%, while the S&P 500 (US500) Index closed at its opening level. The NASDAQ Technology Index (US100) closed positively, 0.21%. Strengthening chip stocks supported the overall market, led by Nvidia's (NVDA) 4% gain. Additionally, energy stocks rose, with the price of WTI crude oil up more than +%.

This week, markets await US producer and consumer price reports, which should help clarify the likely timing and size of any Fed interest rate cut. On Tuesday, July's PPI is expected to decline to 2.3% y/y from 2.6% y/y in June, while July's core PPI, excluding food and energy, is expected to decline to 2.7% y/y from 3.0% y/y in June. On Wednesday, July's CPI is expected to remain unchanged at 3.0% y/y from June, while July's core CPI, excluding food and energy, is expected to decline to 3.2% y/y from 3.3% y/y in June. Markets rate the odds of a 25bp rate cut at the September 18 FOMC meeting at 100% and a 50bp rate cut at 57%.

Equity markets in Europe were mostly up on Monday. Germany's DAX (DE40) rose by 0.02%, France's CAC 40 (FR40) closed down 0.26%, Spain's IBEX 35 (ES35) added 0.07%, and the UK's FTSE 100 (UK100) closed up 0.52%.

WTI crude futures rose by 4.2% to close at $80.06 a barrel on Monday, rising for a fifth straight day amid an escalating conflict in the Middle East that threatens to cut global oil supplies. The Pentagon is beefing up its military presence in the region, with Defense Secretary Lloyd Austin ordering the deployment of an aircraft carrier strike group and additional forces in response to potential Iranian aggression against Israel. OPEC cut its forecast for global oil demand growth in 2024 to 2.11 million bpd from 2.25 million, citing weak data and weaker demand in China. OPEC+ extended production cuts through September with a phase-out in October.

Asian markets were mostly up yesterday. Japan's Nikkei 225 (JP225) rose by 0.56%, China's FTSE China A50 (CHA50) climbed 0.05%, Hong Kong's Hang Seng (HK50) gained 0.13%, and Australia's ASX 200 (AU200) was positive 0.46%.

India's annualized consumer inflation rate fell sharply to 3.54% in July 2024 from 5.08% in the previous month, well below market expectations of 3.65%, marking the softest rise in consumer prices since August 2019. Inflation fell below the RBI's target range of 4% for the first time in nearly five years, although the sharp decline was largely due to a large base effect in food prices, and the Central Bank does not expect price growth to remain as low for the rest of the year.

The Australian dollar rose to $0.66, near its highest level in three weeks, as risk sentiment continued to improve and investors digested mostly positive reports on the domestic economy. Data showed that consumer confidence in Australia rose sharply in August as tax cuts lifted sentiment, although concerns about the Reserve Bank of Australia's (RBA) hawkish stance dampened sentiment. Business confidence also rose in July, while wages rose less than expected in the second quarter.

The Reserve Bank of New Zealand (RBNZ) will hold a monetary policy meeting as early as tomorrow. Economists do not expect any changes, but there is a growing consensus among economists that the RBNZ will announce a 25bp cut in the cash rate. 12 of 21 economists surveyed by Bloomberg expect the Reserve Bank to keep the official money rate at 5.5%, but nine predict it will start the easing cycle. Further supporting the case for policy easing was the RBNZ's survey of inflation expectations, which showed the lowest level of expectations in more than three years. A rate cut would result in a weaker New Zealand dollar. If policymakers decide not to cut rates, they are expected to open the door for a move to the two remaining 2024 decisions. However, it will give the New Zealand dollar an advantage over other currencies, where central banks have already started a downward cycle (EUR, GBP, CAD).

• S&P 500 (US500) 5,344.39 +0.23 (+0.0043%)
• Dow Jones (US30) 39,357.01 −140.53 (−0.36%)
• DAX (DE40) 17,726.47 +3.59 (+0.02%)
• FTSE 100 (UK100) 8,210.25 +42.15 (+0.52%)
• USD Index 103.13 −0.01 (−0.01%)
   

Important events for today:

• – Japan Producer Price Index (m/m) at 02:50 (GMT+3);
• – Australia Wage Price Index (q/q) at 04:30 (GMT+3);
• – UK Average Earnings Index (m/m) at 09:00 (GMT+3);
• – UK Claimant Count Change (m/m) at 09:00 (GMT+3);
• – UK Unemployment Rate (m/m) at 09:00 (GMT+3);
• – German ZEW Economic Sentiment (m/m) at 12:00 (GMT+3);
• – Eurozone ZEW Economic Sentiment (m/m) at 12:00 (GMT+3);
• – US Producer Price Index (m/m) at 15:30 (GMT+3);
• – US FOMC Member Bostic Speaks at 20:15 (GMT+3).

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