Stocks showed a mixed performance on Friday, with European equities and US futures declining while Asian markets gained, as investors assessed the outlook for interest rates.
The Bank of Japan maintained its rates, leading to a weaker yen, as Governor Kazuo Ueda expressed no urgency for rate hikes and indicated that inflation risks are easing. Europe’s Stoxx 600 index fell, particularly after Mercedes-Benz Group AG slashed its financial forecast, causing its shares to drop by as much as 8.4%. In contrast, Asian stocks climbed 0.6%.
The Federal Reserve’s recent 50-basis point rate cut has heightened confidence in a potential soft landing for the US economy, with projections suggesting an additional 1.5 percentage points of cuts by the end of next year. However, Jim Reid, a strategist at Deutsche Bank, noted lingering concerns, as futures indicate a more aggressive rate-cut pace than suggested by the Fed’s dot plot.
Traders are also preparing for “triple witching,” where approximately $5.1 trillion in derivatives contracts will mature, potentially causing increased market volatility. This coincides with the rebalancing of benchmark indexes, historically known for triggering sudden price movements.
On the macroeconomic front, Treasury yields remained stable while the dollar index rose. The pound strengthened following better-than-expected UK retail sales for August, attributed to favorable weather and summer discounts.
In China, the government is contemplating lifting some restrictions on home purchases to revive the struggling housing market. Meanwhile, banks kept their benchmark lending rates unchanged for September, as the central government refrained from further monetary stimulus amidst record-low profit margins for financial institutions.
In commodities, gold reached a new record high amid the Fed’s aggressive easing, while oil is on track for its biggest weekly gain since February.
