Europe facing economic pressures, Oil prices steady
Markets mixed globally. U.S. confidence drops, fueling chance of Fed rate cuts; Treasury yields dip; China’s Economic Stimulus
U.S. Economic Outlook
In the U.S., household confidence took a sharp downturn, with September marking the largest drop in three years due to concerns about the labor market. The Conference Board’s consumer survey revealed a plunge in the labor market differential, which measures whether jobs are perceived as plentiful or hard to get, to 12.6—the lowest since March 2021. The weakening sentiment has led to renewed speculation of an interest rate cut, with futures markets now pricing an 80% chance that the Federal Reserve will reduce rates by 50 basis points after November’s election.
US Markets and Treasury Yields
As a result, Treasury yields have declined, with the two-year yield nearing 3.5%, its lowest point in two years. A “bull steepening” of the yield curve saw the gap between two-year and ten-year Treasury yields increase to 20 basis points, the highest since mid-2022. Stock futures dipped in response, pulling back from record highs. Meanwhile, the U.S. dollar index also dropped, approaching its lowest point of the year.
On Wall Street, the S&P 500 closed at its 41st record high of the year at 5,732.93, while the Dow Jones gained 0.2%, closing at 42,208.22. Despite these gains, the markets showed vulnerability as weaker-than-expected consumer confidence weighed on investors. Bond markets reflected this unease, with the 10-year Treasury yield slipping to 3.73%.
Open a Forex Live Trading account among the multiple available ones we have on our site. Every single one is tailor-made for a specific trading style
European Economic Markets
Europe faces increasing economic pressures as business and manufacturing sectors, particularly in Germany, slipped further into contraction. September’s business surveys revealed slowing activity across the eurozone, leading to expectations that the European Central Bank (ECB) may cut rates again next month. Money markets now place a 50% probability on a third ECB rate cut this year.
Meanwhile, the euro reached $1.12 against the weakening U.S. dollar, creating more room for ECB policy adjustments. A report by the ECB indicated easing wage pressures across the eurozone, which could help reduce inflation. Sweden’s central bank, the Riksbank, acted swiftly, cutting its key rate by 25 basis points to 3.25%, its third reduction this year.
Stock markets in Europe reflected these uncertainties. Germany’s DAX dropped 0.4% to 18,915, and France’s CAC 40 slipped 0.5% to 7,563.77. However, London’s FTSE 100 edged up by 0.1%.
China’s Economic Stimulus
China took aggressive steps to stimulate its economy, including a 30-basis point cut to its medium-term loan rate. These moves followed a series of mortgage rate cuts and stock-buying incentives aimed at reviving its faltering property sector. Chinese stocks responded positively, with the Hang Seng index rising 0.7% to 19,129.10 and the Shanghai Composite gaining 1.2%. Despite this rally, skepticism lingers about the long-term effectiveness of these measures without more substantial fiscal intervention.
China’s property sector woes remain critical, as overseas investors doubt whether the recent monetary easing will meaningfully restore demand. Additionally, the yuan surged to a 16-month high, driven more by stock market optimism than traditional economic fundamentals. Chinese government bond yields also increased slightly, reflecting the complex interplay of domestic growth expectations and external pressures.
Oil, Commodities, and Global Markets
Commodities markets responded to China’s stimulus efforts, with prices for oil and copper rising initially. However, as investor optimism waned, oil prices slipped. U.S. benchmark crude dropped to $71.31 per barrel, while Brent crude fell to $74.26. Global markets showed mixed results; Germany’s DAX fell, while Australia’s S&P/ASX 200 dropped 0.2%. In Asia, Japan’s Nikkei 225 decreased 0.2% to 37,870.26, and South Korea’s Kospi lost 1.3%.
Bond and Currency Movements
In the bond market, 10-year U.S. Treasury yields fell to 3.73%, and two-year yields declined to 3.53%. Germany’s 10-year yield climbed three basis points to 2.18%, while the U.K.’s 10-year yield rose to 3.97%. The U.S. dollar strengthened slightly, reaching 144.01 yen, while the euro stood at $1.1188.
Cryptocurrencies saw declines, with Bitcoin falling 1% to $63,564.76 and Ether dropping 1.2% to $2,620.4.
Our economic blog is a place where you can get regular updates on news and helpful Forex tips
