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At yesterday's stock market close, the Dow Jones Index (US30) increased by 0.07%, while the S&P 500 Index (US500) added 0.58%. The Nasdaq Technology Index (US100) closed positive 1.05% on Monday. US indices closed higher on Monday as bank weakness was offset by renewed demand for technology amid a surge in Nvidia (NVDA) shares and ahead of a slew of economic data releases.

On Tuesday, the US will release retail sales data for July, which is expected to show a pickup in demand early in the third quarter after a smaller-than-expected increase in June. Other data likely indicates that the manufacturing sector is still struggling, with the Empire State manufacturing index expected to fall into negative territory, while the Federal Reserve Bank of Philadelphia's manufacturing index is also expected to remain negative.

The Federal Reserve Bank of New York's Microeconomic Data Center released its July 2023 Survey of Consumer Expectations yesterday, which showed that inflation expectations have declined in the short, medium, and long term. Expectations for year-ahead price increases for food, health care, and rent fell to the lowest level in early 2021. Labor market expectations have strengthened, and households' perceptions of their current financial situation and expectations for the future have improved. These are signs that the Fed will succeed in giving the economy a "soft" landing.

Equity markets in Europe traded yesterday without single dynamics. German DAX (DE40) rose by 0.46%, French CAC 40 (FR40) increased by 0.12% on Monday, Spanish IBEX 35 (ES35) fell by 0.05%, and British FTSE 100 (UK100) closed negative by 0.23%.

Economists believe the European Central Bank (ECB) will pause its rate hike campaign in September, but a further increase by the end of the year is still expected. The ECB rate has been raised nine times in a row since July 2022. But ECB President Christine Lagarde has begun to pave the way for the pause. Faced with a slowdown in activity, especially in the bloc's number one economy, Germany, Lagarde also said the incoming data would be critical to future decisions.

Asian markets were mostly down yesterday. Japan's Nikkei 225 (JP225) decreased by 1.27% yesterday, China's FTSE China A50 (CHA50) lost 1.40%, Hong Kong's Hang Seng (HK50) fell by 1.58% for the day, and Australia's S&P/ASX 200 (AU200) was negative 0.86% on Monday. On Tuesday, Asian markets were once again pressured by another set of weak economic data from China. Data on Tuesday showed that China's industrial production and retail sales growth slowed in July, adding to fears of a fragile post-pandemic recovery in the world's second-largest economy. Less than an hour before the data was released, China unexpectedly cut key interest rates for the second time in three months, which analysts said opened the door for a potential cut in China's benchmark lending rate (LPR) next week.

Japan's second-quarter GDP beat forecasts due to higher exports. Japan's 6.0% annualized growth rate led to a quarterly gain of 1.5%, well above the average estimate of 0.8%. The key GDP data provides some relief to policymakers seeking to balance economic growth with inflation.

In Australia, wage growth was unchanged in the June quarter, while the pace of annual wage increases slowed unexpectedly. This, and the release of dovish minutes from the central bank's July meeting, has strengthened bets that the Reserve Bank of Australia (RBA) will keep rates unchanged at the next meeting.

Analysts believe the Central Bank of New Zealand (RBNZ) will leave interest rates unchanged at 5.5% for the second consecutive meeting on Wednesday, indicating the need for policy to remain restrictive for some time. After raising rates for 12 consecutive meetings, the RBNZ left rates unchanged in July, saying the weaker economy was beginning to ease price pressures. Since then, indicators have pointed to a further loss of economic momentum. Most economists believe the OCR has peaked in this cycle and that the next step will be a rate cut, possibly in the first half of next year. However, ANZ Bank New Zealand and Westpac Banking Corporation expect another quarter percentage point increase will be needed before the end of 2023.

• S&P 500 (F)(US500) 4,489.72 +25.67 (+0.58%)
• Dow Jones (US30) 35,307.63 +26.23 (+0.074%)
• DAX (DE40)  15,904.25 +72.08 (+0.46%)
• FTSE 100 (UK100) 7,507.15  −17.01 (−0.23%)
• USD Index  103.17 +0.33 (+0.32%)

Important events for today:

• Japan GDP (q/q) at 02:50 (GMT+3);
• Australia RBA Meeting Minutes at 04:30 (GMT+3);
• Australia Wage Price Index (q/q) at 04:30 (GMT+3);
• China Industrial Production (m/m) at 05:00 (GMT+3);
• China Unemployment Rate (m/m) at 05:00 (GMT+3);
• China Retail Sales (m/m) at 05:00 (GMT+3);
• Japan Industrial Production (m/m) at 07:30 (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);
• Switzerland Producer Price Index (m/m) at 09:30 (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 Retail Sales (m/m) at 15:30 (GMT+3);
• US NY Empire State Manufacturing Index (m/m) at 15:30 (GMT+3);
• Canada Consumer Price Index (m/m) at 15:30 (GMT+3);
• US FOMC member Kashkari Speaks at 18:00 (GMT+3).

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