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Fed's next rate decision in the sights

The Federal Reserve (Fed) is expected to leave interest rates unchanged this week, but the press conference will be closely watched for signals on the policy outlook amid persistent inflation risks. In the UK and Japan, the Bank of England and the Bank of Japan are also set to announce their monetary policy decisions, with markets assessing whether higher energy prices and inflation pressures warrant a tightening of key interest rates.

  • Date
  • Author Alessandro Fezzi, Content & Publications
  • Reading time 5 minutes

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This week, monetary policy takes centre stage as the Fed announces its interest-rate decision on Wednesday, followed by the Bank of England on Thursday and the Bank of Japan on Friday. Investors will scrutinise the accompanying communications from Fed Chair Kevin Warsh for their assessment of inflation risks, elevated energy prices and the policy outlook. Today, markets might focus on the Ifo Business Survey of the Munich-based Ifo Institute. On Tuesday, the US Conference Board consumer confidence data for July will provide an update on household sentiment and the resilience of consumer spending. Thursday brings second-quarter GDP data for the United States, Germany, France, Italy and the euro area, offering a broad update on global growth momentum. US Personal Consumption Expenditures data for June, the Fed’s preferred inflation gauge, are also released on Thursday alongside initial jobless claims. Inflation remains in focus on Friday, when the euro area publishes preliminary July consumer price data, while Tokyo inflation and China’s July Purchasing Managers’ Indices provide further signals on Japanese price pressures and Chinese economic activity.

Asian stock indices kicked off the new week on a positive note as oil prices fall

Asian equities rose on Monday as a pause in US-Iran hostilities and lower oil prices improved risk appetite ahead of major central-bank decisions and US technology earnings. Australia’s S&P/ASX 200 gained 1.1%, while Japan’s TOPIX rose 1% and the Nikkei 225 added 0.4%; Hong Kong and mainland Chinese markets also advanced. Chinese chipmaker CXMT surged more than 500% in its market debut, while battery producer CATL benefited from stronger first-half earnings and a new share-buyback plan. South Korea’s KOSPI fell 1%, although internet group Naver climbed almost 8% after Nvidia agreed to invest USD 1 billion in newly issued shares to support an artificial intelligence data-centre project.

Wall Street ends last week mixed

US equities closed with no clear trend on Friday as lower oil prices supported the Dow Jones Industrial Average, while investors took profits in artificial-intelligence-related technology shares. The Dow rose 0.5% to 51,947.25 points and the S&P 500 added 0.1% to 7,411.98, whereas the Nasdaq 100 declined 1.2% to 28,128.34 points. Brent crude fell below USD 100 a barrel as investors locked in gains despite the continuing conflict in the Middle East and US efforts to increase pressure on Iran over the Strait of Hormuz. Strong results from chipmaker Intel and German software group SAP failed to revive broader technology sentiment, while Verizon gained after exceeding earnings expectations and American Express declined after missing revenue forecasts.

Euro-area business activity accelerates

Corporate business activity in the eurozone expanded for the first time in four months as the composite Purchasing Managers’ Index rose to 51.9 points in July from 50.0 in June, according to preliminary data released on Friday. The increase exceeded expectations, with both manufacturing and services returning to growth territory. German activity improved across both sectors, while France recorded stronger services activity but a further decline in manufacturing. Economists cautioned that the survey may not fully reflect the latest rise in oil prices and renewed disruption risks to shipping routes in the Middle East.

European shares rebound as oil falls

European equities recovered on Friday, supported by sharply lower oil prices and stronger-than-expected purchasing managers’ surveys for the euro area and UK. The EuroStoxx 50 rose 1.1% to 6280.94 points, while Switzerland’s SMI gained 0.8% to 14,327.20.

Corporate and economic calendar

Corporate news in focus: Quarterly figures from AstraZeneca, LVMH, Vodafone and Welltower.

Economic data in focus: German Ifo Business Climate Index (10:00), Bundesbank monthly report (12:00), US durable goods orders (14:30) and Dallas Fed Manufacturing Index (16:30).

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.