US equity futures remained stable on September 4, 2023, as markets closed for the Labour Day holiday. This follows a significant selloff in technology stocks on Friday, driven in part by renewed concerns surrounding Nvidia. The S&P 500 futures were unchanged, while NASDAQ futures saw a slight increase of 0.1%. The beginning of September historically poses challenges for investors, as the month is often marked by volatility and downturns.
With trading nearing record highs, the upcoming weeks are set to be crucial. Important economic indicators, including jobs numbers and inflation data, will be released shortly, alongside the Federal Reserve‘s decision on interest rates scheduled for September 17, 2023. These events will play a critical role in shaping market direction, especially given that September has a reputation for hosting notable market declines.
Concerns about tariff tensions and the independence of the Federal Reserve are compounding risks. Peter Sidorov, an economist at Deutsche Bank AG, remarked, “The bar to derail a Fed rate cut on September 17 appears high. However, markets are anticipating over 140 basis points of easing by the end of 2026, a level typically seen only during recessions since the 1980s.”
In the European markets, the Stoxx 600 index rose by 0.1%, with defense shares, particularly BAE Systems and Rheinmetall AG, leading the gains. This uptick followed reports that Europe is strategizing for potential post-conflict deployments in Ukraine. Additionally, Novo Nordisk spearheaded a rally in healthcare stocks after positive results from a cardiovascular study related to its drug, Wegovy.
Several analysts believe that a stronger economic outlook could help European equities gain momentum. Goldman Sachs forecasts the Stoxx 600 to climb approximately 2% to 560 by the end of the year, buoyed by improving growth prospects and attractive valuations. Meanwhile, JPMorgan strategist Mislav Matejka characterized the recent loss of momentum in equities as “healthy.”
Asian markets displayed mixed results, with a remarkable 19% surge in Alibaba Group contrasting with declines in chipmaking stocks. Indonesian shares fell sharply, marking their most significant drop in nearly five months, as political risks escalated when President Prabowo Subianto canceled a trip to China due to unrest over living costs.
In the bond markets, yields on Indonesian government bonds rose to their highest levels in nearly three weeks, signaling investor apprehension. The Bloomberg Dollar Spot Index slipped by 0.1%, with the Swedish and Norwegian currencies showing gains against the US dollar.
While US cash bond markets were closed for the holiday, European bonds showed a general weakening. This comes as France prepares for a confidence vote that could potentially destabilize the government. The spread between French and German 10-year bonds remained stable at 78 basis points, although it had peaked at 82 points earlier in the month.
In commodities, silver prices exceeded $40 per ounce for the first time since 2011. Gold prices also approached historical highs, driven by rising optimism for an impending interest rate cut by the Federal Reserve. West Texas Intermediate (WTI) crude futures rose by 1% to nearly $64.70 per barrel.
Despite the US markets being closed on this day, significant data releases are expected this week, including the ISM manufacturing and services reports. The upcoming jobs report on Friday is particularly crucial, with US economists predicting a modest increase in both headline and private payrolls.
As investors await these economic indicators, attention will also focus on the political landscape in the US, particularly regarding President Donald Trump‘s attempts to remove Fed Governor Cook. A federal appeals court recently ruled that tariffs imposed under the International Economic Emergency Powers Act were illegal but allowed them to remain in place until October 14 while the administration appeals the decision to the Supreme Court.
While the markets are currently adjusting to a mix of economic data and political developments, the coming days will be pivotal in determining the trajectory of equities as September unfolds. As the Federal Reserve’s decisions loom, investors remain cautious yet optimistic about the potential for continued growth.
