Futures on US stock indices are trading nearly unchanged compared to Friday's closing levels. S&P 500 futures rose by 0.1%, while the high-tech NASDAQ added only 0.2%. US futures and European stocks also show sluggish trading.
China's recent measures to support its markets compensated for the uncertainty regarding interest rate prospects after cautious central bank officials' comments at Jackson Hole. In his speech last Friday at the annual US Central Bank conference in Jackson Hole, Jerome Powell emphasized that the Federal Reserve's work in combating inflation is not yet finished, noting progress in slowing down price growth. He also stated that the regulator would act cautiously, leaving the possibility for the Fed to maintain rates at the next September meeting after their increase in July to a 22-year high. The yield on two-year Treasury bonds increased by two basis points today, reinforcing Friday's growth.
Meanwhile, the interest rate-sensitive technology sector led growth in Europe after European Central Bank President Christine Lagarde stated on the same Friday that inflation in the Eurozone remained high and needed to be tackled by all available means. Although Lagarde made no comments on future policy, investors converged in the opinion that rates would continue to rise. Meanwhile, British markets are closed today due to the weekend.
As it was mentioned earlier, the US stock market reacted little to Powell's speech. This suggests that investors lack the information provided by policymakers. However, more market participants realize that the Fed can hold rates at their peaks for an extended period, and the Fed's tightening cycle may not be finished yet.
Asian indices rose after Beijing, among other things, reduced fees on stock trading. However, Chinese stocks lost a significant portion of their gains, once again showing that efforts to stimulate Chinese markets fail in the face of economic problems. Foreign funds accelerated their sales, potentially leading to the largest outflow from markets this month in history.
Credit Agricole believes that fundamental reforms are needed in China, which will lead to economic growth. More substantial political actions are also necessary to truly change the sentiment.
As of today, shares of China Evergrande Group fell by 87% in Hong Kong trading after a 17-month pause. Once the country's largest developer, now the company with the highest debt, reported new losses and postponed meetings with creditors.
As for the S&P 500, the pressure on the index has eased slightly, but the upside potential is limited. Bulls need to gain control of $4,427. Only from this level, the price may surge to $4,447. Bulls also need to control $4,469, which is likely to cancel the bearish market. In the event of downward movement amid decreased risk appetite, bulls will have to protect $4,405. Breaking through this level, the trading instrument may return to $4,382 and $4,357.
