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On Thursday, the Dow Jones (US30) Index gained 1.61%, while the S&P 500 (US500) Index closed 1.39% higher. The Nasdaq Technology Index (US100) closed yesterday positive 2.34%. Signs of a strengthening US economy are driving stocks higher today after July retail sales posted the largest increase in a year, and weekly initial jobless claims unexpectedly fell to a 5-week low. The strong reports bolstered the projection for a soft economic landing.

The US weekly initial jobless claims unexpectedly fell by 7,000 to a 5-week low of 227,000, indicating a strengthening labor market versus expectations of a rise to 235,000. US retail sales for July rose 1.0% m/m, exceeding expectations of 0.4% m/m and the largest increase in a year and a half. Atlanta Fed President Bostic said he is "open" to an interest rate cut in September. The Fed cannot "afford to be late" in easing monetary policy amid signs of cooling in the labor market. St. Louis Fed President Musalem said that from his perspective, "the risk to both sides of the Fed's mandate seems more balanced. Accordingly, the time is approaching when an adjustment to the moderately restrictive policy may be appropriate ahead of future meetings." Markets rate the odds of a 25 bps rate cut at the September 17–18 FOMC meeting at 100% and a -50 bps rate cut at this meeting at 28%.

Walmart (WMT) is up more than 6% after reporting a second-quarter revenue of $169.34 billion, which is better than the consensus estimate of $168.46 billion, and it is raising its net sales prognosis. Cisco Systems (CSCO) rose more than 8%, leading gains in the Dow Jones Industrials and Nasdaq 100 stocks after the company reported fourth-quarter revenue of $13.64 billion, better than the consensus of $13.53 billion, and projection of above-average earnings.

Equity markets in Europe were mostly up on Thursday. Germany's DAX (DE40) rose by 1.66%, France's CAC 40 (FR40) closed 1.23% higher, Spain's IBEX 35 (ES35) added 1.23%, and the UK's FTSE 100 (UK100) closed up 0.80%.

Germany's DAX (DE40) Index has risen for 8 consecutive sessions, and it has nearly reversed losses from the global equity sell-off that ended last week. Financial stocks took center stage, with Deutsche Bank and Commerzbank adding between 2.9% and 3.3%. Finally, Mercedes, Porsche, BMW, and Volkswagen continued yesterday's gains, although Siemens and Airbus were in slightly negative territory. Meanwhile, the UK economy slowed slightly in Q2 and stalled in June, which was in line with prognoses, but business investment unexpectedly contracted.

WTI crude oil prices rose 1.5% to $78.16 a barrel on Thursday, rebounding from two days of losses as recession fears eased. There were also fears of possible Iranian retaliation against Israel following reports that Hamas is unlikely to take part in new ceasefire talks in Gaza. However, gains were halted by lingering demand concerns, with EIA data showing an unexpected rise in US crude inventories, which increased by 1.357 million barrels last week, ending a six-week decline and contrary to expectations of a 2 million barrel drop.

The US natural gas (XNG/USD) prices hit a one-month high of $2.28 per MMBtu in August as declining domestic supply coincided with expectations of strong cooling demand. The latest EIA data showed that US utilities withdrew 6 billion cubic feet of natural gas in the week ended August 9, despite a seasonal upward trend, marking the first August decline since 2006 and contrasting with market expectations of a 43 billion cubic feet increase. Lower production is expected to support prices, making them more sensitive to any supply disruptions or additional warming.

Asian markets also had the advantage of rising yesterday. Japan's Nikkei 225 (JP225) rose by 0.78%, China's FTSE China A50 (CHA50) added 1.10% Hong Kong's Hang Seng (HK50) was down 0.02%, while Australia's ASX 200 (AU200) was positive 0.19%.

The Bank of Japan (BoJ) will take a more cautious approach to raising interest rates after the recent turmoil in global markets to avoid a rapid appreciation of the yen, BMI said in a recent note. BMI strategists said the Bank of Japan will take a more cautious approach and will only raise rates by 25 bps to 0.50% this year, down from our previous estimate of 50 bps.

Malaysia's economy grew by 5.9% y/y in Q2 2024, compared to preliminary growth of 5.8% and 4.2% growth in Q1. This was the highest GDP growth since Q4 2022 on the back of strong output across all sectors. Activity in services accelerated (5.9% vs. 4.8% in Q1), helped by wholesale and retail trade. Production in the manufacturing industry also increased (4.7% vs. 1.9%) due to non-metallic minerals, basic metals, and products thereof, as well as petroleum, chemical, rubber, and plastics industries.

• S&P 500 (US500) 5,543.23 +88.02 (+1.61%)
• Dow Jones (US30) 40,563.58 +555.19 (+1.39%)
• DAX (DE40) 18,183.24 +297.64 (+1.66%)
• FTSE 100 (UK100) 8,347.35 +66.30 (+0.80%)
• USD index 103.00 +0.44 (+0.43%)
   

Important events for today:

• New Zealand Producer Price Index (q/q) at 01:45 (GMT+3);
• Australia RBA Gov Bullock Speaks at 02:30 (GMT+3);
• New Zealand RBNZ Gov Orr Speaks at 05:30 (GMT+3);
• UK Retail Sales (m/m) at 09:00 (GMT+3);
• Eurozone Trade Balance (m/m) at 12:00 (GMT+3);
• US Building Permits (m/m) at 15:30 (GMT+3);
• US Michigan Consumer Sentiment (m/m) at 17:00 (GMT+3).

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