Analyst
European equities experienced downturns as concerns over high interest rates to tackle inflation persisted. The Stoxx 600 Index is trading (currently) 0.5% lower.
Yesterday, the Bank of England maintained its bank rate at 5.25%, despite some members advocating for an increase. In addition to that, UK retail statistics indicated a month-on-month growth of 0.4% for August 2023, though the year-on-year data showed a decline of 1.4% for the same month. Unlike the ECB the previous week, Bank of England Governor Andrew Bailey said the central bank stands ready to make further increases if necessary. In the UK, market sentiment briefly rose and the FTSE 100 hit a 4-month high before falling back to end the day down 0.69% (in regular trading; further losses in after-hours trading).
In the US, robust labor market data supported the Fed's stance to maintain higher interest rates over an extended period. Consequently, applications for unemployment benefits reached their lowest since January. Following this strong data, the 10-year Treasury yield reached a level not seen since 2007, at 4.5%.
US equity futures saw a downtrend, with the US 500 facing its worst day since March, dropping over 1.6%. The tech-laden US 100 fell by 1.8%. Investors are turning to cash and bonds due to similar returns and reduced risks. Rising concerns of stagflation across several nations, fueled by high interest rates and soaring oil and food prices, remain at the forefront of global discussions.
In Asia, the Bank of Japan maintained its interest rates (at -0.1%) and forward guidance. Although inflation is expected to slow, the JPY weakened as many analysts expected further indications of a normalization of the Bank of Japan's monetary policy and thus an end to the negative interest rate policy that has been in place since January 2016 - which did not materialize. On the other hand, China saw a strong rebound in its equities, likely a result of anticipations for more policy support measures.
Oil prices surged partly due to Russia's decision to prohibit exports of specific fuels. In contrast, European natural gas prices saw a decline after Chevron and Australian labor unions decided to end a month-long strike at crucial export facilities. Spot gold prices, after experiencing a significant drop the previous day, stabilized but remains under pressure from high yields.
Key events today:
JPY Jibun Bank Manufacturing, Services, & Composite PMI (flash) - 00:30 UTC+0 (released)
JPY BoJ Interest Rate Decision - 03:00 UTC+0 (released)
GBP Retail Sales - 06:00 UTC+0 (released)
EUR HCOB Manufacturing, Services, & Composite PMI (flash) - 07:15 UTC+0 (released)
EUR HCOB Manufacturing, Services, & Composite PMI (flash) - 07:30 UTC+0 (released)
EUR HCOB Manufacturing, Services, & Composite PMI (flash) - 08:00 UTC+0 (released)
GBP S&P Global/CIPS Manufacturing, Services, & Composite PMI (flash) - 08:30 UTC+0 (released)
USD S&P Global Manufacturing, Services, & Composite PMI - 13:45 UTC+0
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