MARKET WRAPS
Stocks:
Indexes in Europe mostly fell to start the week–however the FTSE was higher–as investors gauged if the stock rally on fresh hopes of a September rate cut by the Federal Reserve was overblown.
“The market is pricing in more than an 85% probability that the Fed cuts interest rates by 25 basis points in September, up from around 72% ahead of Powell’s speech,” ING said.
Nomura Capital Management said the Treasury market’s reaction to the speech felt overdone.
“There is still a fairly high degree of uncertainty,” it said, and as Powell mentioned, the path for rates wasn’t necessarily preset.
Risk markets were priced for a meaningful easing cycle, and that doesn’t tie out with the level of uncertainty, it added, saying that it found Powell’s tone generally balanced, though he clearly kept a rate cut in September on the table.
Barclays said any Fed cuts would still depend on upcoming jobs and inflation data for August.
“The door for another hold is not closed.”
Still, there was a high bar for this scenario and high inflation alone wouldn’t suffice, it added.
U.S. Markets:
Stock futures pointed to small losses, with the market looking to take a breath after Friday’s rally.
The corporate highlight of the week is Nvidia’s earnings report on Wednesday.
Its comments on demand for AI hardware will be eagerly watched after AI stocks were hit last week amid fears of a bubble.
Stocks to Watch
Comcast; Walt Disney: Trump said in a social-media post overnight that Disney-owned ABC and Comcast-owned NBC should have their licenses revoked for unfair coverage of conservatives.
Keurig Dr Pepper agreed to buy the owner of Peet’s Coffee for $18 billion, a prelude to spinning off its coffee brands.
Forex:
The euro barely reacted to a better-than-expected German Ifo business-climate index .
ING said the euro could rise to $1.20 by the end of the year if the Fed opts for a series of interest-rate cuts after Powell’s speech at Jackson Hole on Friday when he said that “shifting risks may warrant adjusting policy.”
ING forecast the euro at $1.17 by the end of the current quarter, but expected prospects of further rate cuts will lift it further.
The dollar edged higher against a basket of currencies, recovering modestly after sharp falls on Friday as investors adjusted U.S. rate-cut expectations.
Bonds:
Bunds barely reacted to the German Ifo business-climate index.
The five- to 30-year segment of the Treasury curve has room to steepen, Citi said.
“We prefer five- to 30-year steepeners due to the less punitive carry compared to two- to 10-year.”
This is combined with Citi’s view that two-year yields may have limited room to rally in the short term unless nonfarm payrolls data are weak, it added.
Separately it said it continued to expect the year-end level of the 10-year Treasury yield at 4.10%, sticking to its forecast it has held since last year.
However, Citi modestly updated its other benchmark points to better fit its view for a steeper curve and lower policy rate expectation to be priced for 2026.
Citi’s base case for the two-year Treasury yield is 3.50%; 3.65% for the five-year yield and 4.70% for the 30-year yield.
The two-year Treasury note had recorded one of its best year-to-date performances outside of a recession since 2000, and without a single rate cut from the Fed, Payden & Rygel said.
Energy:
Oil prices were little changed as investors weighed expectations of U.S. rate cuts in September and potential disruptions to Russian crude flows.
Fading optimism over a Russia-Ukraine summit and Trump’s tariff threats against India continued to provide underlying support to prices.
“It’s looking increasingly likely that secondary tariffs against India for their purchases of Russian oil will go ahead on Aug. 27.”
Gas
European natural-gas prices slipped.
Inventories across the EU were nearly 76% full, according to Gas Infrastructure Europe, below the 91% level seen last year and lower than the 83% five-year average.
Prices were supported by fading optimism over a meeting between the Ukrainian and Russian presidents, alongside concerns over upcoming maintenance at Norwegian plants.
In Asia, buyers stepped up LNG imports last week to replenish inventories after the summer.
Imports into China, Japan, and South Korea increased on a 30-day average, with Beijing’s daily intake at its highest since January, according to ANZ.
Metals:
Gold futures ticked lower, though they held to higher ground after Powell’s dovish tone on the prospect of monetary policy easing.
Powell’s speech at the Jackson Hole symposium before the weekend reassured markets that the Fed is tilted toward cutting interest rates rather than renewed tightening, supporting the appeal of non-interest-bearing bullion, Pepperstone said.
Near-term, the release of Personal Consumption Expenditure data could weigh on the dollar and boost the precious metal further, and even more crucially, further signs of softness in next week’s Nonfarm Payroll report would strengthen the case for cuts and amplify gold demand, it added.
EMEA HEADLINES
Orsted Shares Tumble After Stop-Work Order on Revolution Wind Project
Orsted shares tumbled after the Danish renewable-energy company said it received a stop-work order from the U.S. government on a key offshore wind project off the coast of Rhode Island.
In opening trade, shares fell 16% to 180.35 Danish krone ($28), taking their year-to-date performance down more than 45%.
UniCredit Raises Physical Stake in Commerzbank to 26%
UniCredit said it converted part of its position in peer Commerzbank into stock, raising its equity stake in the German bank it hopes to engineer a merger with to 26%.
The Italian lender said Monday that it converted financial instruments it holds in the bank into physical shares, consolidating the equity stake into its accounts.
GLOBAL NEWS
Tech Rally Shows Signs of Losing Steam
The prospect of lower interest rates is boosting many parts of the market: real-estate firms, banks, manufacturers. The outlook for Wall Street’s most popular stocks-the Magnificent Seven tech giants that have led major indexes to records-is much less clear.
Those market leaders-Amazon.com, Alphabet, Apple, Meta Platforms, Microsoft, Nvidia and Tesla-have been buffeted recently by questions about the potential for artificial intelligence, concerns about their increasingly stretched valuations and competition from hitherto unloved parts of the market.
How a Historic Immigration Drop Is Changing the Job Market
Last week, Federal Reserve Chair Jerome Powell said the U.S. labor market has entered “a curious kind of balance.” The demand for workers has cooled, yet the unemployment rate has held steady because the supply of labor has slowed abruptly.
Behind that slowing in the labor supply is a dramatic swing in immigration, from one of the biggest waves in U.S. history to almost none. Economists say that could have subtle but lasting consequences.
Israeli Backlash Builds Against Macron’s Push for Palestinian State
PARIS-French President Emmanuel Macron’s decision to recognize a Palestinian state has sparked a backlash from the Israeli government, galvanizing hard-liners and drawing an accusation from Prime Minister Benjamin Netanyahu that he is stirring up antisemitism.
Macron’s decision shook up the status quo among Western powers, which for decades dangled recognition as a means to bring Israel and the Palestinians to the negotiating table for a two-state solution. Australia and Canada have said they are ready to follow in France’s footsteps, while the U.K. has said it would do so if Israel doesn’t agree to a cease-fire in Gaza.
Hunting Russian Drones in a Prop Plane With Shotguns
This month, a beaten-up, Soviet-era propeller-driven plane taxied to a halt on a rural runway and two of Ukraine’s top air aces clambered out, one carrying a rifle. The pair, clad in olive-drab flight suits, are part of a low-tech solution to the high-tech problem of Russian drones.
The 56-year-old pilot, who learned to fly as a hobby before the war, and the gunner, 38, a former auto mechanic who had never been in a plane before the invasion, are part of a squadron dedicated to knocking down the unmanned Russian attack and reconnaissance aircraft that are the bane of ground troops and civilians.
Write to clare.kinloch@wsj.com
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(END) Dow Jones Newswires
August 25, 2025 05:28 ET (09:28 GMT)
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