European and Asian stock markets displayed mixed performances on Monday following a positive signal from Federal Reserve Chair Jerome Powell, who indicated last week that a US interest rate cut could be imminent.
In Europe, Frankfurt’s DAX fell, while the Paris CAC 40 rose, and Milan’s market remained flat in early afternoon trading. London was closed for a holiday.
In Asia, Tokyo and Seoul ended lower, whereas Hong Kong and most other exchanges saw gains.
The boost in equities on Friday came after Powell announced at a central bankers’ summit in Wyoming that “the time has come” for the Fed to reduce interest rates, which had been raised to a 23-year high to combat inflation.
The Fed is now anticipated to lower its key rate at the upcoming policy meeting on September 17-18, though the size of the cut and the potential for further reductions remain uncertain.
Powell’s remarks helped push all three major New York indexes up by more than one percent on Friday. He emphasized that the “timing and pace” of future rate cuts will depend on economic data, leading analysts to closely monitor upcoming indicators.
Independent analyst Stephen Innes noted, “With the labor market cooling off and inflation inching closer to the two percent target, Powell delivered exactly what Wall Street had been hoping for.” He added, “Investors are currently in an ideal scenario—anticipating a series of rate cuts that could potentially avoid a recession.”
Upcoming US economic reports include second-quarter growth figures on Thursday, followed by the Fed’s preferred inflation measure, the personal consumption expenditures (PCE) price index, on Friday, and jobs data next week.
Weak job data in early August had unsettled markets, raising concerns that the Fed might have delayed too long in cutting rates to prevent a recession. Deutsche Bank analysts expect the Fed to cut rates by 0.25 percentage points next month, though “weak labor-market data could shift the focus” to a half-point reduction.
In Europe, a survey revealed a further decline in German business confidence for August, reflecting ongoing struggles in the continent’s largest economy.
The yen strengthened against the dollar after Powell’s comments and remarks by Bank of Japan Chief Kazuo Ueda, who suggested the possibility of future rate hikes by his institution. The yen was trading around 144 per dollar.
Traders also monitored rising tensions in the Middle East, with Israel and the Iran-backed Lebanese militant group Hezbollah exchanging fire. This geopolitical uncertainty pushed Brent crude oil up by 2.7 percent to over $81 per barrel.
Key figures around 11:40 GMT:
- Paris – CAC 40: Up 0.2% at 7,593.25 points
- Frankfurt – DAX: Down 0.1% at 18,607.34 points
- London – FTSE 100: Closed for a holiday
- Tokyo – Nikkei 225: Down 0.7% at 38,110.22 (close)
- Hong Kong – Hang Seng Index: Up 1.1% at 17,798.73 (close)
- Shanghai – Composite: Flat at 2,855.52 (close)
- Dollar/Yen: Down at 144.18 yen from 144.34 yen on Friday
- Euro/Dollar: Down at $1.1167 from $1.1193
- Pound/Dollar: Down at $1.3184 from $1.3209
- Euro/Pound: Up at 84.71 pence from 84.70 pence
- West Texas Intermediate: Up 2.7% at $76.85 per barrel
- Brent North Sea Crude: Up 2.7% at $81.15 per barrel
- New York – Dow: Up 1.1% at 41,175.08 (close)