The Nikkei hit a record high on Tuesday, driven by semiconductor shares, while investors awaited Federal Reserve Chair Jerome Powell’s testimony on potential rate cuts. European markets are set for a mixed open, with S&P 500 futures and Nasdaq futures gaining, following Wall Street equities closing at record peaks on Monday. Asian shares also performed well, with Taiwanese shares reaching a record high before experiencing profit-taking and Chinese and Hong Kong indexes also rising.
Investors are anticipating a rate cut in September, as Powell is expected to be cautiously dovish during his congressional appearances this week. Market optimism is bolstered by weak labor market data, with most economic indicators pointing towards softening in the U.S. economy. Additionally, the upcoming U.S. consumer price report on Thursday is expected to show a slowdown in inflation rates, leading markets to price in two rate cuts for the rest of 2024.
In the foreign exchange market, the euro remained stable around $1.0825, while the U.S. dollar steadied near four-week lows against a basket of currencies. The Japanese yen and offshore Chinese yuan also held their ground after recent fluctuations. Treasuries were steady, with government bond yields remaining relatively unchanged. In commodity markets, gold prices rose slightly, while oil prices fell after a hurricane in Texas caused less damage than anticipated.
Overall, the global market is reacting positively to strong performances in Asian and European markets, with investor confidence supported by the expectation of a rate cut in the U.S. The focus remains on Powell’s congressional testimony and the upcoming consumer price report, as these events will provide further insight into the economic outlook for the remainder of 2024. With stable foreign exchange and bond markets, as well as fluctuations in commodity prices, investors are closely monitoring developments to make informed decisions in the current economic climate.
