US and European stock markets were mixed on Monday as investors traded cautiously ahead of the US Federal Reserve’s first interest-rate cut since 2020.
In New York, the Dow was up slightly but the wider S&P 500 and the tech-heavy Nasdaq were lower in late morning trading. In Europe, London closed marginally higher but all the main continental exchanges were slightly lower.
The dollar fell ahead of Wednesday’s rate cut announcement, while haven investment gold rose to a new record high.
US stocks surged last week on positive economic news and as investors increasingly priced in a full half-point cut, with the Dow and S&P 500 reaching a whisker of their record highs.
Fed officials have widely signalled a rate cut for Wednesday — the first since the Covid recession four years ago — but debate remains over whether it will be 25 or 50 basis points.
“The odds now favour a 50-basis point cut instead of 25 basis points, according to futures market trading, but the decision could still go either way and the Fed tends to be conservative,” said Charles Schwab strategist Joe Mazzola.
Last week’s sharp run up in stock prices leaves them susceptible to a correction, said David Morrison, analyst at Trade Nation.
“Investors appear to be pricing in a Goldilocks scenario of cheaper borrowing costs, with more rate cuts to come, in an economy which shows few signs of a hard landing or recession,” he said.
“If so, they may prove to be over-optimistic. Traders should prepare themselves for some large price swings on Wednesday evening.”
Worries over the Chinese economy also weighed on sentiment.
– Central bank rates –
Other central banks have policy meetings this week.
London’s FTSE 100 index dipped Monday ahead of the Bank of England’s own decision on borrowing costs due Thursday, one day after the Fed outcome.
The BoE is expected to keep its key rate unchanged after cutting it in August, while the European Central Bank further reduced borrowing costs last week as inflation cools.
Commerzbank chief executive said Monday he had his own vision for the lender’s future after Italy’s UniCredit indicated it wanted a merger. The shares fell 0.2 percent.
Asian stock markets fluctuated earlier Monday, with Hong Kong edging up but Singapore slipping. Trade was muted with holidays in Tokyo and Shanghai.
On currency markets the yen briefly hit 140.07 per dollar — its strongest level since July last year — ahead of a policy meeting at the Bank of Japan (BoJ) starting Thursday.
Most analysts expect the BoJ to hold rates steady after a surprise hike at the end of July sparked market turmoil.
Gold struck a fresh record high of $2,589.70 per ounce.
Traders are keeping tabs on developments in China after more weak data on credit, retail sales, industrial production and house prices stoked concerns about the state of the world’s number two economy.
The figures “collectively add to concerns that policy measures announced in recent weeks and months have so far failed to have any measurable impact in lifting economic growth”, said National Australia Bank’s Ray Attrill.
Oil prices have fallen recently on concerns about Chinese demand, but they jumped over one percent Monday as much US Gulf production is still offline after the passage of Hurricane Francine.
– Key figures around 1540 GMT –
New York – Dow: UP 0.2 percent at 41,464.26 points
New York – S&P 500: DOWN 0.2 percent at 5,612.87
New York – Nasdaq Composite: DOWN 0.8 percent at 17,537.80
London – FTSE 100: UP 0.1 percent at 8,278.44 (close)
Paris – CAC 40: DOWN 0.2 percent at 7,449.4 (close)
Frankfurt – DAX: DOWN 0.4 percent at 18,633.11 (close)
Tokyo – Nikkei 225: Closed for a holiday
Hong Kong – Hang Seng Index: UP 0.3 percent at 17,422.12 (close)
Shanghai – Composite: Closed for a holiday
Euro/dollar: UP at $1.1122 from $1.1079 on Friday
Pound/dollar: UP at $1.3197 from $1.3125
Dollar/yen: UP at 140.79 yen from 140.76 yen
Euro/pound: DOWN at 84.27 pence from 84.40 pence
Brent North Sea Crude: UP 1.1 percent at $72.39 per barrel
West Texas Intermediate: UP 1.5 percent at $69.65 per barrel
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