By Jamie McGeever
ORLANDO, Florida (Reuters) – TRADING DAY
Understanding the Dynamics of Global Markets
By Jamie McGeever, Markets Columnist
Global stock markets surged to new heights on Tuesday, driven by investor optimism that US inflation remains under control, which could lead to a rate cut next month. Nonetheless, there is ongoing anxiety regarding President Donald Trump’s influence on both the Federal Reserve and other institutions in the public and private sectors.
In today’s column, I examine the performance of Latin American currencies and question whether their appealing “carry” can sustain the impressive gains observed this year.
If you wish to delve deeper, I recommend several articles to clarify today’s market developments:
1. Trump mulls lawsuit against Fed’s Powell over renovations.
2. Trump criticizes Goldman Sachs’ CEO over research on tariffs.
3. Trump’s choice for Labor Statistics agency head is economist Antoni from Heritage.
4. AI startup Perplexity bids $34.5 billion for Google’s Chrome browser.
5. Treasury yields have been stagnant this summer: Mike Dolan.
Key Market Movements Today:
* FX: The US dollar dropped 0.5% amid increasing expectations for a rate cut.
* STOCKS: New records for Japan’s Nikkei 225 and TOPIX, Australia’s ASX, S&P 500, Nasdaq, and MSCI All Country benchmarks. The Russell 2000 index climbed 3%, marking its best day since May.
* SECTORS: All S&P 500 sectors gained, with communications up 1.8%. US airlines rose, with United at +10% and Delta at +9%. Japan’s Softbank increased by 7%, totaling approx. 30% over the past week.
* BONDS: Treasury yields fell by 3 bps on the short end and rose by up to 4 bps on the longer end, resulting in the steepest curve in a month.
* COMMODITIES: Oil prices dipped, with WTI futures down 1.2% nearing $63/bbl, influenced by demand/supply dynamics and anticipation of the upcoming Trump-Putin meeting in Alaska.
Discussion Points:
* Weakness in the long-end of the US bond market and a steeper yield curve are attributed to concerns about the certainty of an upcoming rate cut. There is growing unease regarding the Fed’s credibility and independence amidst Trump’s pressure on Chair Jerome Powell. Analyses by James Bullard and Stephen Miran emphasized the necessity of maintaining Fed independence.
* Trump’s increasing interference in economic matters has raised alarm. His public criticisms of Powell for not initiating rate cuts and the consideration of a lawsuit regarding Fed renovations reflect his exertions on the financial landscape. He has recently dismissed the Bureau of Labor Statistics commissioner and targeted Intel’s CEO and Goldman Sachs’ executives for their tariff impact analyses.
