As Monday morning dawned, U.S. stock futures exhibited a cautious optimism, casting their focus on the impending Federal Reserve policy decision. Futures linked to the Dow Jones Industrial Average inched up by a modest 12 points, equivalent to 0.03%. Similarly, single-stock futures for the S&P 500 and Nasdaq experienced slight upticks of 0.09% and 0.16%, respectively.
The previous week witnessed mixed fortunes for the broad market index and the Nasdaq, with both experiencing declines, marking their second consecutive week in the red. In contrast, the Dow managed to conclude the week with a marginal 0.10% gain.
The Fed’s Focus on Inflation
All eyes are now on the Federal Reserve's decision regarding interest rates. The central issue at hand is how the Fed conveys its stance on inflation. Quincy Krosby, Chief Global Strategist for LPL Financial, emphasized the significance of the Fed's tone: "How the Fed delivers the pause is crucial for November and December rate expectations, but whether it’s presented with a dovish or hawkish tilt is what matters most for financial markets."
Recent inflation data has largely aligned with economists' predictions. While the producer price index exhibited higher gains than anticipated, the core PPI (excluding food and energy) matched estimates. The core consumer price index also saw a slightly higher-than-expected increase of 0.30% month-over-month in August, surpassing the projected 0.20%.
Labor Market and Inflation Indicators for FTSE Futures
Despite these numbers, Krosby suggests that the strong labor market may signal higher prices in FTSE futures. The recent United Auto Workers' strike in Detroit could add further upward pressure to prices, adding complexity to the inflationary landscape. Policymakers will keep a close eye on several economic data releases throughout the day, including September’s Housing Market Index data and the New York Fed’s announcement of September’s Business Leaders Survey results.
In Europe, markets kicked off the week on a slightly negative note. The pan-European Stoxx 600 index opened with a 0.20% dip. Various sectors exhibited mixed performance, with single-stock futures experiencing marginal gains of 0.30%, while household goods suffered a 0.50% decline at the start of trading.
Asia-Pacific Markets Prepare for Central Bank Decisions
Across the Asia-Pacific region, markets entered the week with caution as investors anticipate central bank decisions. The U.S. Federal Reserve’s decision, expected early Thursday in Asia, will be closely monitored. Australia's central bank will release minutes from its September 5 policy meeting on Tuesday. The Bank of Japan will conclude its monetary policy meeting on Friday, with markets eager for signals about a potential shift in its ultra-easy monetary policy. Lastly, the People’s Bank of China is expected to announce its loan interest rate futures decisions later in the week.
Evergrande, the embattled Chinese real estate giant, faced further setbacks as its wealth management staff were detained over the weekend. This development led to a sharp initial decline of as much as 22.60% in Evergrande’s shares on Monday. However, the shares managed to recover slightly later in the session, gaining 1.61% compared to Friday’s close.
SoftBank’s Ambitious AI Plans
Reports suggest that SoftBank, a Japanese investment holding company, is considering a substantial investment in artificial intelligence. The company is exploring options, including a potential partnership with Microsoft-backed OpenAI in the realm of hot futures. SoftBank may also invest in rival ventures in the AI sector. While SoftBank declined to comment on the rumors, Graphcore, a U.K.-based AI chipmaker, denied receiving an offer from SoftBank.
Singapore’s non-oil domestic exports marked their 11th consecutive month of decline, falling by 20.10% year on year. While this drop exceeded economists' forecasts of a 15.80% decline, it was slightly less than the 20.30% fall recorded in July. Total trade in Singapore also declined by 15.20% year on year in August, amounting to 100 billion Singapore dollars ($73.4 billion). Both imports and exports witnessed declines of 15.60% and 14.70%, respectively.
Inflation Outlook Dips to a Two-Year Low
A sentiment gauge released on Friday revealed that future inflation expectations for single-stock futures have reached their lowest point in over two and a half years. The University of Michigan’s consumer sentiment survey showed that one-year inflation expectations for September have dropped to 3.10%, matching the lowest point since January 2021. Additionally, the five-year outlook has declined to 2.70%, tying with its lowest level since December 2020. However, the overall sentiment gauge has also decreased, measuring 67.7, which is below August’s 69.5 and lower than the Dow Jones estimate of 69.2.
