Global stock markets showed signs of stabilization after several days of losses. Investors are grappling with uncertainty about the US economy and potential Federal Reserve interest rate cuts.
In Europe, the Stoxx 600 index remained largely unchanged. Chemical and mining stocks experienced the largest declines, with iron ore prices dropping to their lowest level since 2022. In the US, futures contracts held steady, while Asian markets saw a reversal, with Hong Kong and Japan experiencing declines that eroded earlier gains.
Focus on Upcoming Economic Data
Market attention is now shifting towards upcoming economic reports. Traders are keenly awaiting the weekly jobless claims data, due later today, and Friday’s nonfarm payrolls report. These figures are crucial for assessing the health of the US economy and the likelihood of a soft landing as the Federal Reserve contemplates easing its policy.
Expectations for Federal Reserve Action
Recent data has heightened expectations for Federal Reserve rate cuts. A reading on US job openings fell short of forecasts, and the Fed’s Beige Book indicated flat or declining economic activity. Swap traders are now pricing in at least 100 basis points of rate cuts this year, including a potential large cut of 50 basis points.
Eddy Loh, Chief Investment Officer at Maybank Group Wealth Management, commented on Bloomberg Television, “We believe the US soft landing scenario remains intact, but the next two to three months could be challenging. If the Fed opts for a 50 basis point cut, it might be viewed negatively, as it could suggest the Fed is concerned about the economy.”
Market Reactions
US Treasury yields remained stable after a significant drop on Wednesday, following data that indicated a slowdown in the US labor market. The dollar also held steady.
Iron ore prices fell to around $90 per ton. China’s primary steel industry group has advised mills to exercise caution in increasing output too quickly to avoid undermining a post-summer recovery.
