European stocks are likely to open broadly higher on Monday, bolstered by the People's Bank of China reducing the 14-day reverse repurchase interest rate by 10 basis points to 1.85%, continuing the series of cuts initiated in July.
A closely watched press conference with three leading financial regulators scheduled for Tuesday is expected to reveal more about the government's strategy for economic recovery.
In another significant development, U.S. congressional leaders announced on Sunday that they have reached an agreement on a short-term spending bill. This bill will fund federal agencies for approximately three months and help prevent a potential government shutdown.
However, overall gains may be limited due to escalating U.S.-China rivalry and increasing tensions in the Middle East. According to Reuters, the U.S. Commerce Department is considering a ban on Chinese software and hardware in connected and autonomous vehicles on American roads, citing national security concerns.
In the Middle East, both Israel and Hezbollah have threatened to escalate their cross-border attacks, raising fears of a full-scale conflict.
Asian stocks traded mixed, with Japanese markets closed for a holiday.
The U.S. dollar held steady in Asian trading as investors await a glut of U.S. economic data, statements from Federal Reserve officials, and the outcomes of central bank meetings in Sweden and Switzerland.
This week, U.S. reports on durable goods orders, new home sales, and consumer confidence are likely to capture investor attention, along with a report on personal income and spending that includes the Federal Reserve’s preferred inflation gauge.
Several Federal Reserve speakers, including regional presidents Raphael Bostic and Austan Goolsbee, are scheduled to speak this week. Fed Governor Christopher Waller noted in an interview on Friday that policymakers have considerable room to cut rates over the next six to twelve months, though the pace of reductions will depend on incoming jobs and inflation data.
According to CME FedWatch, Fed futures traders currently anticipate 75 basis points in rate cuts by the end of this year, and nearly 200 basis points in cuts by December 2025.
The Swiss National Bank is set to meet on Thursday, with markets fully pricing in a quarter-point cut. Sweden's central bank is also expected to reduce rates by 25 basis points during its meeting on Wednesday.
S&P Global is scheduled to release estimated manufacturing and services PMIs for key Eurozone economies, including Germany and France, later today. The Eurozone's composite manufacturing PMI is anticipated to show further contraction in September.
Gold reached a record high in Asian trading, driven by the momentum from the Federal Reserve’s significant interest rate cut last week.
Oil prices extended their gains, having surged around 4% last week as Middle East tensions persisted. Hezbollah launched over 100 rockets early Sunday across a broader area of northern Israel after the country allegedly detonated several electronic devices used by the Lebanese group.
U.S. stocks ended mixed on Friday but posted strong gains for the week following the Federal Reserve’s aggressive rate cut earlier in the week. Sentiment was slightly dampened after FedEx cut its earnings outlook. The Dow closed marginally higher at a new record high, while the S&P 500 eased by 0.2% and the Nasdaq Composite shed 0.4%.
European stocks ended lower on Friday after a rally in the previous session triggered by the Federal Reserve’s large interest rate cut. The pan-European STOXX 600 declined by 1.4%. Germany's DAX and France's CAC 40 both lost about 1.5%, while the UK’s FTSE 100 dropped 1.2%.
