Market Update

In recent weeks, global equity markets have experienced an unusual scenario where positive economic data appears to dampen market enthusiasm due to expectations of central banks easing monetary policies. Last week's US non-farm payroll data, which exceeded expectations, initially created uncertainty regarding the Fed's next move. However, Federal Reserve Chairman Jay Powell's testimony to Congress later in the week eased concerns and propelled the S&P 500 to an all-time high.
Powell's testimony was notably dovish, emphasizing that the latest jobs report had not altered the economic outlook. He pointed out several policy issues, including trade tensions, the federal debt ceiling, and Brexit, that continue to affect the economic landscape. This dovish stance was echoed in the minutes from the Fed's recent policy meeting, indicating that additional monetary policy accommodation would likely be necessary soon. Consequently, the market now anticipates a potential 0.75% cut in US interest rates by the end of the year, although we still expect the upcoming cut to be 0.25%.
Similar sentiments were reflected in the minutes of the ECB meeting, revealing a "broad agreement" among members to be prepared for further easing of the monetary policy. ECB President Mario Draghi had already indicated the bank's readiness for "additional stimulus," with discussions on restarting asset purchases and reducing interest rates taking place during the meeting.
Aside from central bank developments, oil prices have surged in recent weeks, reaching a seven-week high. Concerns over the potential impact of tropical storm "Barry" in the Gulf of Mexico led to output cuts as a precautionary measure. Additionally, escalating tensions with Iran resulted in naval escorts for oil tankers, contributing to the rise in oil prices.
Looking ahead, significant economic data releases are expected. China will unveil second-quarter GDP, industrial production, and retail sales data. The US will announce retail sales and industrial production figures, housing starts, and the Fed's Beige Book report. Noteworthy data from the UK includes retail sales and employment figures. Furthermore, EU foreign ministers will convene to discuss Iran's non-compliance with the 2015 nuclear accord, adding to the week's points of interest.