A look at the day ahead in U.S. and global markets from Mike
Dolan
After a stifling August so far, world markets caught some relief
on Tuesday as this month’s bond squeeze eased a bit – with
investors now awaiting signals from Wyoming and distracted by
hopes of a reprise of the early-year AI craze.
There was little to trigger the bounce, other than U.S.
10-year Treasury yields being dragged back from 16-year highs of
4.36% ahead of Thursday’s annual Federal Reserve conference in
Jackson Hole – at which some indications of longer-term Fed
policy thinking is eyed.
No news proved good news in China – where the relentless
stream of negativity around the country’s spluttering economy
and ailing property sector seemed to dry up as President Xi
Jinping attended the BRICS summit in South Africa. The onshore
yuan steadied amid supportive action by China’s state
banks in the swaps market, and Chinese stocks perked
up from the year’s lows.
But the global rebound was first seeded on Wall St on Monday
as tech stocks got a lift ahead of chip giant Nvidia’s
quarterly results on Wednesday, with hopes of some refocus on
the artificial intelligence boom that’s already lifted Nvidia’s
stock 220% for the year to date. The Nasdaq 100 clocked
its first gain in a week, adding 1.6% for its biggest rise of
the month, and the S&P500 also notched its first advance
in five.
Overall, MSCI’s all-country index was on
course on Tuesday for its first back-to-back daily gains of
August so far. And S&P futures were up ahead of the bell.
Even though Treasury yields hit new cycle highs in Asia
trading, there was some demand at those levels as investors
await the Jackson Hole event and Fed Chair Jerome Powell’s
keynote speech there on Friday. The dollar eased back in
line with the retreat in yields too.
Futures markets are now see a 50-50 chance of another Fed
hike next month given the recent strength of the economy – but
the focus this week may well be on how long rates stay at these
levels and whether estimates of long-term sustainable interest
rates have risen.
There were background concerns about the impact on U.S.
banks of this latest hit to bond prices and borrowing rates.
Credit-rating firm S&P Global late on Monday cut ratings and
revised its outlook for multiple mid-tier U.S. banks, following
a similar move by Moody’s, and warned funding risks and weaker
profitability will likely test the sector’s credit strength.
And U.S. government spending curbs were also set to come
back into focus in Congress next month, with the outside chance
of a government shutdown as Republican factions push for more
cuts beyond what was agreed to raise the debt ceiling in May.
Elsewhere, investors were enthralled by plans by SoftBank’s
chip designer Arm for the biggest initial public
offering of the year – even after reporting 1% fall in annual
revenue.
And “Call of Duty” maker Activision will sell its
non-European streaming rights to Ubisoft Entertainment
to get the biggest deal yet in video-gaming past British
regulators, potential owner Microsoft said on Tuesday.
Events to watch for on Tuesday:
* U.S. July existing home sales, Richmond Fed August business
survey, Philadelphia Fed service sector survey
* Richmond Federal Reserve President Thomas Barkin, Chicago Fed
President Austan Goolsbee, Fed board governor Michelle Bowman
* U.S. corporate earnings: Lowe’s, Medtronic
* BRICS Summit in Johannesburg. China’s President Xi Jinping
meets SAfrican President Cyril Ramaphosa in Pretoria beforehand
(By Mike Dolan, editing by Christina Fincher,
[email protected]. Twitter: @reutersMikeD)
