Global stock markets displayed mixed results as Wall Street remained closed for a holiday. Despite this pause in US trading, stocks across Europe held steady, while technology shares in Asia, particularly from China, surged significantly. The European benchmark, the STOXX 600, rose by 0.1 percent amid initial optimism following improved manufacturing data, although this enthusiasm waned as trading progressed.
In Asia, shares of Chinese tech giant Alibaba experienced a notable increase, climbing 18 percent after the company reported that advancements in artificial intelligence contributed to a substantial surge in revenue for its cloud services. Meanwhile, US stock futures remained flat, with investors looking ahead to a crucial week filled with significant economic data from the United States.
US Economic Data and Its Implications
The focus this week will be on a series of economic indicators from the US, including surveys on manufacturing, services, and employment figures culminating in the August payrolls report, scheduled for release on September 8. Analysts predict that employment may have increased by approximately 75,000 jobs, while estimates vary widely, with projections ranging from no change to a gain of 110,000 jobs. The unemployment rate is expected to edge up to 4.3 percent.
According to Samy Chaar, chief economist at Lombard Odier, the state of the jobs market is crucial for the Federal Reserve’s monetary policy decisions. “There’s lots of talk from the Fed and from market commentators that labor markets are cooling, leading to a potential rate cut in September, but it’s not a clear-cut situation,” Chaar noted. He emphasized that this week could be pivotal for investors and policymakers alike.
The anticipation of lower borrowing costs has kept Wall Street near record highs. Historically, September has been the worst-performing month for the S&P 500, raising concerns among investors about potential market volatility.
Trade Policy and Political Uncertainty
Compounding the market’s apprehension is the ongoing uncertainty surrounding US tariff policies. A recent ruling by a Court of Appeals deemed several of President Donald Trump’s import levies illegal, although they will remain in effect pending an appeal to the Supreme Court. This ruling has raised questions about existing trade agreements and those currently under negotiation.
Negotiations with Japan have stalled over rice trade, while talks with South Korea face similar delays. Furthermore, investor sentiment is impacted by Trump’s criticisms of the Federal Reserve’s independence, particularly with Lisa Cook, a Federal Reserve governor, set to present arguments against her dismissal.
In Europe, attention is also on France, where Prime Minister Francois Bayrou is initiating discussions with political parties to prevent the collapse of his government ahead of a confidence vote next week. Opposition leaders suggest the vote is likely to fail, which could lead to further political instability. Following last week’s announcement of the confidence vote, market stability has been observed, but ongoing developments could reignite concerns regarding France’s fiscal health.
The spread between French and German 10-year bond yields widened sharply last week but has since stabilized at 78 basis points. Mohit Kumar, chief European economist at Jefferies, predicts a high probability of Bayrou’s government failing the no-confidence vote, potentially resulting in early elections. “We maintain a negative outlook on France and expect spreads to approach the 90 basis points level,” Kumar asserted.
Worries about fiscal health in various countries have driven long-dated bond yields higher. German 30-year yields reached a new 14-year high of 3.38 percent on Monday, with benchmark 10-year yields rising by 3 basis points to 2.76 percent. The closure of US Treasury markets for the holiday allowed higher European yields to support the euro, which was trading up 0.4 percent at $1.1721.
In commodity markets, gold prices gained as the dollar weakened, rising by 2.2 percent last week and reaching a four-month high of $3,481 per ounce, with an additional 1.0 percent increase on the latest trading day. Oil prices also saw an uptick, with Brent crude increasing 0.9 percent to $68.01 per barrel. This rise comes amid concerns over increased output levels and the implications of US tariffs on demand, balanced against supply disruptions from intensified airstrikes in the Russia-Ukraine conflict.
As markets navigate these various pressures, the upcoming economic data from the US will be pivotal in shaping investor sentiment and policy directions in the coming weeks.
