Photo by Timothy Newman on Unsplash
 

At Monday's close, the Dow Jones (US30) Index was up 0.16%, while the S&P 500 (US500) Index was down 0.32%. The Nasdaq Technology Index (US100) closed negative 0.85%.

On Monday, San Francisco Fed Chair Mary Daly said that "the time to adjust policy is now." Richmond FRB President Barkin said he still sees upside risks to inflation, although he supports "lower" interest rates as the labor market cools. Markets rate the odds of a 25bp rate cut at the September 17–18 FOMC meeting at 100% and a 50bp rate cut at 36%.

Equity markets in Europe were mostly down yesterday. Germany's DAX (DE40) fell 0.08%, France's CAC 40 (FR40) closed up 0.18%, Spain's IBEX 35 (ES35) fell 0.11%, and the UK's FTSE 100 (UK100) was not trading on Monday. European stocks closed subdued on Monday, weakly holding on to the previous week's highs, as markets continued to assess the extent to which consolidated expectations of an imminent rate cut by the Federal Reserve will affect European borrowing costs. Ifo's German business climate indicator fell for the fourth straight time in August, matching market expectations and adding to concerns after preliminary estimates of the economy contracting in the second quarter and reflecting further pessimism among German consumers.

WTI crude oil prices rose more than 3% on Monday, surpassing the $77 a barrel mark, marking the third straight session of gains on concerns about supply risk amid escalating tensions in the Middle East. Over the weekend, intense rocket exchanges between Israel and Hezbollah heightened fears that the wider regional conflict will affect oil supplies. In addition, market sentiment was boosted by expectations of looser monetary policy after Federal Reserve Chairman Jerome Powell hinted at a possible interest rate cut, driven by concerns about the labor market and progress toward the 2% inflation target.

Asian markets were predominantly up yesterday. Japan's Nikkei 225 (JP225) was down 0.66%, China's FTSE China A50 (CHA50) added 0.07%, Hong Kong's Hang Seng (HK50) gained 1.06%, and Australia's ASX 200 (AU200) was positive 0.76%.

Australia's consumer inflation report will be released as early as tomorrow. Inflation is expected to fall from 3.8% to 3.4% y/y. Reserve Bank of Australia (RBA) policymakers want to see further declines before abandoning the hawkish bias. Any signs of easing inflationary pressures could have a negative impact on the Australian dollar (AUD), which rose to the highest levels in more than a year amid the RBA's hawkish stance. RBA chief Michele Bullock recently said that despite signs of weakening inflation, it is "premature" to consider cutting interest rates. Therefore, if consumer prices for July turn out to be worse than expected, it will only strengthen the opinion of policymakers and further support the Australian currency.

• S&P 500 (US500) 5,616.84 −17.77 (−0.32%)
• Dow Jones (US30) 41,240.52 +65.44 (+0.16%)
• DAX (DE40) 18,617.02 −16.08 (−0.086%)
• FTSE 100 (UK100) 8,327.78 0 (0%)
• USD Index 100.86 +0.14 (+0.14%)
   

Important events today:

• – German GDP (q/q) at 09:00 (GMT+3);
• – US CB Consumer Confidence (m/m) at 17:00 (GMT+3).

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