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On Tuesday, stocks in the US ended the session lower. The Dow Jones Index (US30) was down 0.15%, while the S&P 500 Index (US500) fell by 0.20%. The Nasdaq Technology Index (US100) closed negative 0.33%. Volatility increased ahead of the upcoming Jackson Hole Symposium and the release of minutes from the Fed's last meeting, which could provide insight into the potential size of the expected September rate cut. Weakness in microchip stocks also weighed on the overall market. Energy producers also fell after crude oil prices fell to a one-week low.

Boeing (BA) fell 4.2% after its 777x test fleet was grounded due to structural cracks.

Canada's annual inflation rate fell to 2.5% in July 2024 from 2.7% in the previous month, matching market expectations and marking the softest rise in consumer prices since March 2021. The result matched the Bank of Canada's prognosis that inflation would fall to the 2.5% mark in the second half of the year, although inflation is still expected to jump due to the incoming base effect for gasoline prices. In addition, the closely watched median and truncated averages of key rates came in below expectations at 2.4% and 2.7%, respectively, reinforcing dovish expectations for the Bank of Canada.

Equity markets in Europe were mostly down yesterday. The German DAX (DE40) was down 0.35%, the French CAC 40 (FR40) closed down 0.22%, the Spanish IBEX 35 (ES35) was down 0.13%, and the British FTSE 100 (UK100) closed down 1.00%.

Eurozone construction output rose by 1.7% m/m in June, the largest increase in 17 months. Germany's July Producer Price Index fell by 0.8% y/y, marking the thirteenth consecutive month of year-on-year price declines. The Bundesbank said in its monthly report that relatively strong wage growth in the Eurozone will likely keep core inflation "elevated." That sets the stage for the euro to strengthen against the US dollar in the medium term. However, swaps discount the chances of a 25bp ECB rate cut at the September 12 meeting to 100%.

Sweden's Riksbank cut its key rate by 25 bps to 3.5% at its August 2024 meeting, in line with market consensus, and signaled that two or three more rate cuts would be needed this year if inflation evolves in line with the Central Bank's estimates. It was the second rate cut in this cycle. The Riksbank noted that inflation has continued to fall in recent months, with core rates converging quickly to the 2% target, giving the Central Bank more confidence that the disinflation projected in the June policy report correctly gauges the economic backdrop. In addition, policymakers noted that the growth outlook for Sweden's economy may be weaker than expected earlier this year.

Turkey's Central Bank left the benchmark weekly repo auction rate unchanged at 50% at its August 2024 meeting, as expected by markets. The Monetary Policy Committee noted that core inflation in the Turkish economy rose slightly as expected but remained below the second-quarter average amid signs that the restrictive monetary backdrop has led to a slowdown in domestic demand.

WTI crude oil prices settled near $74 a barrel on Tuesday after dropping 2.5% in the previous session amid hopes of a ceasefire in the Middle East. The US Secretary of State Antony Blinken confirmed that Israeli Prime Minister Benjamin Netanyahu has accepted an offer to resolve differences preventing a ceasefire agreement in Gaza, but tensions remain high.

Asian markets traded flat yesterday. Japan's Nikkei 225 (JP225) rose by 1.80%, China's FTSE China A50 (CHA50) was down 0.45%, Hong Kong's Hang Seng (HK50) was down 0.33%, while Australia's ASX 200 (AU200) was positive 0.22%.

• S&P 500 (US500) 5,597.12 −11.13 (−0.20%)
• Dow Jones (US30) 40,834.97 −61.56 (−0.15%)
• DAX (DE40) 18,357.52 −64.17 (−0.35%)
• FTSE 100 (UK100) 8,273.32 −83.62 (−1.00%)
• USD Index 101.37 −0.52 (−0.51%)
   

Important events today:

• – Japan Trade Balance (m/m) at 09:00 (GMT+3);
• – US Crude Oil Reserves (w/w) at 17:30 (GMT+3);
• – US FOMC Meeting Minutes at 21:00 (GMT+3).

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