Stocks showed little movement following last week’s risk-on rally as traders await further indications on potential interest rate cuts from the Federal Reserve. Meanwhile, the yen strengthened against the dollar.
The Stoxx 600 benchmark opened with minimal changes, while European defense stocks, including Rheinmetall AG, dropped after Germany announced it would halt new aid requests for Ukraine amid efforts to control government spending. U.S. equity futures remained steady, and the U.S. dollar traded at its lowest level since March.
Investors are approaching the week with caution after last week’s surge in risk appetite pushed the S&P 500 close to a record high. The focal point for the week will be Federal Reserve Chairman Jerome Powell’s speech at the Jackson Hole Economic Symposium on Friday, where he is expected to provide updates on U.S. monetary policy.
Seth Carpenter, Chief Global Economist at Morgan Stanley, noted, “All attention this week will be on Jackson Hole. We anticipate Powell will outline the Fed’s medium-term strategy, with a focus on balancing economic growth while addressing inflation.”
Goldman Sachs recently reduced its forecast for a U.S. recession over the next year to 20% from 25%, citing stronger-than-expected retail sales and jobless claims data. The firm noted that if the August jobs report, due on September 6, is favorable, the recession probability might be further lowered to 15%.
Yen Strengthens
In Asia, the yen led gains among major currencies as markets await insights from Bank of Japan Governor Kazuo Ueda. Ueda is set to address parliament this week regarding last month’s rate hike, which has had global repercussions.
Despite a recent drop in market expectations for additional rate hikes in Japan this year, major investors like Vanguard continue to anticipate further tightening. The yen gained for a second consecutive session, trading around 145 per dollar, as Japanese equities fell for the first time in six days.
Oil Declines
Oil prices fell for the fourth time in five sessions, with traders monitoring U.S.-led efforts to broker a cease-fire in the ongoing Gaza conflict and escalating tensions in the Russia-Ukraine war.
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