(Bloomberg) — Stocks hovered near record highs and the dollar steadied as a new week began, with investors focused on the Federal Reserve’s upcoming policy decision.
The MSCI All Country World Index held steady after closing at an all-time high Friday. MSCI’s Asia equity index also traded near a record high. South Korean shares gained 0.4% amid a change to the capital gains tax threshold for stock investors. There will be no cash trading in Treasuries during Asian hours as Japan is closed for a holiday. Gold fell 0.3%.
Oil was little changed as traders weighed moves to crack down on Russian flows against forecasts for a surplus later in the year. French bond futures opened mostly steady in Asian trading after Fitch Ratings downgraded France to A+ from AA-.
The key question for investors this week is whether Fed officials will push back against market bets on a series of interest-rate cuts extending into next year. In addition to the Fed’s decision on Wednesday, the Bank of Canada, the Bank of England and the Bank of Japan are also set to announce policy decisions this week.
“The week is going to be all about central bank decisions. Of course, the biggest one will be the Fed, which is all but certain to cut interest rates by 25 basis points,” wrote Kyle Rodda, a senior market analyst at Capital.com in Melbourne. “The question is how aggressive the Fed is with this easing, with the markets effectively pricing in a cut at each of the final three meetings of the year.”
Traders on Monday will also be closely parsing a slew of Chinese data to help gauge the health of the world’s second-largest economy. Retail sales growth may have quickened from a year ago while industrial output may have slowed, according to Bloomberg surveys.
“We expect another soft set of numbers from today’s Chinese August ‘data dump,’ which can provide some temporary support for dollar-yuan,” Commonwealth Bank of Australia strategists led by Joseph Capurso wrote in a note to clients.
The US-China talks are focused on trade, the economy and the status of ByteDance Ltd.’s TikTok, which faces a deadline this week to reach a deal to continue operations in the US.
Officials were also expected to lay the groundwork for a potential meeting between President Donald Trump and Xi Jinping as soon as October.
What Bloomberg’s Strategists Say…
“Global equities are likely to draw fresh momentum as traders price for the Federal Reserve to deliver its first rate cut since December 2024 and signal that there may be more to come. The US dollar will weaken should policymakers reinforce easing bets.”
— Mary Nicola, Markets Live strategist. Click here for the full analysis.
The Fed’s policy meeting will remain the key focus as markets question whether officials push back against bets of easing at each remaining meeting this year. A quarter-point reduction is seen as a sure thing when the Fed announces its policy decision Wednesday, with a small potential for a half-point move amid signs US job growth is slowing rapidly.
The Fed is likely to deliver a dovish cut with at least one member in favor of a 50 basis point reduction, and new forecasts that imply a steeper easing path to guard against a weakening labor market, said Elias Haddad, a senior market strategist at Brown Brothers Harriman. “A dovish Fed policy stance can drag US dollar lower and support risk assets.”
Trump predicted a “big cut” from the Federal Reserve this week ahead of a pivotal meeting at which the central bank’s governors are expected to ease policy for the first time in nine months.
Elsewhere, Fitch Ratings downgraded France to A+ from AA- late Friday. The score is now a notch lower than the UK and on par with Belgium, indicating the upheaval of repeated government collapses has locked the country into an enduring battle to contain a swelling debt burden.
France’s 10-year benchmark bonds offer one of the highest yields in the euro area, akin to Lithuania, Slovakia and Italy. The premium paid over German peers has nearly doubled since President Emmanuel Macron called elections last year, a sign of weaker investor demand.
Corporate News:
ANZ Group Holdings Ltd. will pay a A$240 million ($160 million) fine after admitting misconduct across its institutional and retail divisions, the culmination of a months-long investigation by the corporate watchdog into one of the country’s biggest lenders. Singapore’s GIC Pte is in talks to sell its stake in US landlord Yes! Communities Inc. to Brookfield Asset Management in what could be one of the biggest exits for the sovereign wealth fund in years, according to a person with knowledge of the matter. Britain’s second-largest grocer J Sainsbury Plc has terminated talks with Chinese e-commerce firm JD.com Inc. to sell its general merchandise unit Argos. Chinese technology and mobile gaming giant Tencent Holdings Ltd. has appointed banks for its first bond offering in four years. Some of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 10:06 a.m. Tokyo time Australia’s S&P/ASX 200 fell 0.4% Euro Stoxx 50 futures were little changed Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1725 The Japanese yen was little changed at 147.56 per dollar The offshore yuan was little changed at 7.1233 per dollar Cryptocurrencies
Bitcoin fell 0.7% to $115,021.79 Ether fell 0.6% to $4,591.21 Bonds
Australia’s 10-year yield advanced five basis points to 4.26% Commodities
West Texas Intermediate crude rose 0.4% to $62.94 a barrel Spot gold fell 0.4% to $3,629.49 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Matthew Burgess and Michael G. Wilson.
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