US equity futures are seeing a slight bid, tracking Asian and European markets higher, as the week starts off more muted than last week but with a preference towards Quality. As of 7:45am, S&P 500 and Nasdaq 100 contracts are about 0.3% higher as Mag7 names are mixed but net higher and Semis are bid, while Europe’s Stoxx 600 index erased most of a 0.5% advance. Bond yields are flat as is the USD while the yen continued dropping as more jawboning from an ex-BOJ member suggested that rate hikes in Japan are effectively over, giving a green light to restart carry trades . Commodities are stronger led by Energy, WTI is higher after adding 4.5% last week. Copper is higher after 5 consecutive weekly losses and 11 of last 12 weeks, -20% from highs. Today’s macro focus is the NY Fed’s 1-year inflation expectation (3.02% prior). This is a heavy macro data week with both growth and inflation measures and the market is waiting on that data to determine the next market narrative. Earnings are almost complete but DE, HD, and WMT will provide important updates on the Consumer.
In premarket trading, Starbucks rose 2% after the WSJ reported that activist investor Starboard Value has taken a stake. Here are the other notable premarket movers:
There was some relief for investors Monday from the volatility that ripped through markets in recent sessions, fueled by concerns the Fed is waiting too long to cut rates. The S&P 500 last week posted both its biggest one-day slump and best rebound since 2022.
“We all know that August tends to be a market in which we could see massive volatility simply because the liquidity does tend to be lower,” Sonja Marten, head of FX and monetary policy research at DZ Bank, said in an interview with Bloomberg TV. “This complete overreaction, panic move last week kind of goes to prove that.”
And while the VIX has retreated from its highest levels since the early days of the Covid-19 pandemic, there’s no certainty the relative calm will continue, with Wednesday’s US inflation data the key volatility event for the week. According to Citigroup, traders are positioning for the S&P 500 to move 1.2% in either direction when the consumer price index report is released.
Meanwhile, as bond markets have moved to account for a Fed that is “behind the curve,” the risk isn’t “priced into current equity multiples,” according to Morgan Stanley strategists. The team led by Michael Wilson said economic growth is the primary concern for investors, rather than inflation and rates. “Markets are looking for better growth or more policy support to get excited again,” the team wrote in a note. “We don’t see confirming evidence in either direction near term, leaving the index to trade in a tight range for now.”
Still, investors did take flight from stocks during last week’s wild swings. They reduced their equity allocations at the sharpest pace since the onset of the Covid pandemic, according to data from Deutsche Bank. Aggregate allocation to stocks is now in the 31st percentile and underweight, strategists including Parag Thatte wrote in a note dated Aug. 9. Just three weeks ago, exposure was at the top of the historical range in the 97th percentile.
Meanwhile, over the weekend we got a stark reminder that inflation still faces upside risks, after Fed Governor Michelle Bowman said she still sees upside risks for inflation and continued strength in the labor market, signaling she may not be ready to support an interest-rate decrease when US central bankers next meet in September. Money markets have fully priced a rate cut in September and about 100 basis points of easing for the year, according to swaps data compiled by Bloomberg. Separately, continued gains in oil in the next few weeks may throw a wrench in the Fed's rate cutting plans.
“The problem is also that central banks have been emphasizing that they are acting very data-dependent these days,” DZ Bank’s Marten said. “Investors are trading from one data point to the next. That does also create additional volatility.”
Elsewhere, the European Central Bank is now seen as likely to cut its deposit rate once a quarter through the end of next year, a timetable that will see its easing cycle end sooner than previously anticipated. A Bloomberg survey of forecasters shows that benchmark hitting 2.25% in December 2025 following six consecutive quarter-point reductions.
European stocks erased gains as more sectors turn red, with traders preparing for a busy week on the data front. Real estate and health care lag peers, while energy and miners lead climbers. UK’s FTSE 100 outperforms regional peers with a 0.3% rise. In London, BT Group Plc rallied more than 7% after Bharti Global agreed to buy a stake of about 24.5% in the UK carrier. Here are some of the other biggest European movers on Monday:
Earlier, Asian equities advanced for a second session as technology stocks in South Korea and Taiwan extended a rebound from last week’s rout. The MSCI Asia Ex-Japan Index climbed 0.4%, kicking off the week on a positive note after declining for four straight weeks. Technology stocks in the region, including Taiwan Semiconductor Manufacturing Co., Tencent Holdings Ltd., Hon Hai Precision Industry Co. and Samsung Electronics Co., were among the biggest contributors to the gains. Japan is closed for a holiday. Artificial intelligence-related stocks are regaining momentum after a brutal selloff last week that saw an unwinding of some of these crowded trades. Traders will shift their focus to key US data prints this week as they assess the possibility of a recession in the world’s largest economy.
In FX, the Bloomberg dollar spot index is steady. NZD and AUD are the strongest performers in G-10 FX, JPY and CHF underperform. Dollar-yen is at around 147.6: the yen dropped the most against the dollar among major peers after former board member Makoto Sakurai said the Bank of Japan won’t be able to raise the policy rate again this year, given the market turmoil that followed its recent hike and the low likelihood of the nation’s economy seeing a rapid recovery. That followed last week’s surge as traders slashed bearish bets in the wake of the Bank of Japan’s July 31 rate hike. The BOJ’s move prompted investors to dump carry trades, unleashing turmoil that ricocheted across global markets.
In rates, treasuries are slightly cheaper across the curve, although yields remain near to Friday’s closing levels and spreads remain steady. Treasury 10-year yields trade around 3.955%, cheaper by about 1bp on the day, with bunds lagging by ~1bp in the sector. Treasury spreads are broadly within 1bp of Friday’s close. Fed comments over the weekend included Governor Michelle Bowman, who said she sees upside inflation risk, signaling caution on rate cuts. In Asia, China 10-year yields rose as much as 5bps, as the central bank warned on potential risks arising from the relentless rally in the debt market.
In commodities, oil extended its first weekly gain since early July, with traders continuing to monitor Iran’s response to last month’s assassination of a Hamas leader in Tehran. WTI futures are higher by 1.1%, supporting energy names; Brent rises 0.6% near $80.15. Spot gold rises roughly $13 to trade near $2,444/oz, the highest in a week. Spot silver gains 1.4% near $28. Most base metals trade in the green.with traders focused on the week’s key US data. Bullion has gained more than 18% this year and remains in touching distance of last month’s all-time high. Along with rate-cut expectations, it’s also been supported by firm central bank buying and robust demand from Chinese consumers.
Looking today's calendar, it is a quiet session for scheduled events: the US data slate includes July New York Fed 1-year inflation expectations (11am) and monthly budget statement (2pm).No Fed speakers scheduled for the session
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APAC stocks began the week mostly higher following last Friday's gains on Wall St and light macro newsflow over the weekend, but with gains capped amid an indecisive mood in China and holiday closure in Japan for Mountain Day. ASX 200 advanced with the upside led by outperformance in Consumer Discretionary, Tech, Telecoms and Financials. Hang Seng and Shanghai Comp. were indecisive as lingering economic concerns offset the PBoC's liquidity efforts.
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European equities, Stoxx 600 (+0.3%) have started the week on a mostly firmer footing, taking positive leads from a constructive APAC session. European sectors hold a strong positive bias. Insurance takes the top spot, propped up by post-earning strength in Hannover Re. Basic Resources and Energy are both higher, given the strength in underlying commodity prices. US Equity Futures (ES +0.2%, NQ +0.3%, RTY -0.1%) are mixed, with the ES and NQ very modestly firmer, benefiting from the generally positive risk tone.
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