(Bloomberg) — European stocks rose as traders looked forward to a final set of US economic data that could determine the size of Wednesday’s Federal Reserve interest-rate cut.
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Retailers and banking stocks led gains in Europe’s Stoxx 600, with moves in other markets muted in the countdown to the Fed’s decision. Futures for US stocks were steady.
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On the eve of the Fed’s first rate cut in five years, investor attention will home in on US retail figures due later. Opinion in markets is divided between expectations that the Fed will cut by 25 or 50 basis points.
“August’s US retail sales report is, arguably, the most important of today’s releases, given that a soft print would likely see participants go ‘all-in’ on the idea of a jumbo 50 basis point Fed cut tomorrow,” wrote Michael Brown, a strategist at Pepperstone Group Ltd., in a note. “Though it’s tough to imagine an equally aggressive paring of dovish bets were the data to beat expectations.”
The dollar steadied after a four-day decline, while Treasury yields edged lower as investors looked ahead to the Fed meeting outcome.
In Asia, Japan’s Nikkei 225 fell, weighing on the regional equity index. Concern continued about weakness in China’s economy. Disappointing data over the weekend may add pressure on the authorities to ramp up fiscal and monetary stimulus if the nation is to reach this year’s growth target.
Trading in China, Taiwan and South Korea was shut for public holidays.
The yen was steady after strengthening beyond 140 per dollar for the first time since July 2023 on Monday, as the Japanese currency extended its rally from the weakest point in nearly 38 years in July.
The yen has been steadily appreciating due to market expectations that the interest rate differential between the US and Japan will narrow further leading to a decline in the export-heavy Japanese equities.
The upcoming Bank of Japan meeting may affect sentiment toward Japanese shares and, “should Ueda indicate an October rate hike is possible, USD/JPY and the Nikkei will likely come under renewed selling pressure,” said Tony Sycamore, an analyst at IG Australia Pty Ltd.
The BOJ is expected to stay on hold on Friday after raising rates twice this year with all 53 economists surveyed by Bloomberg said Ueda’s board will leave the benchmark rate at 0.25% when its two-day meeting concludes.
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In commodities, gold remained near record levels, with traders betting bullion will benefit from a weaker dollar and lower Treasury yields following the Fed decision. Oil edged higher.
Key events this week:
Germany ZEW, Tuesday
US business inventories, industrial production, retail sales, Tuesday
Eurozone CPI, Wednesday
Fed rate decision, Wednesday
UK rate decision, Thursday
US US Conf. Board leading index, initial jobless claims, US existing home sales, Thursday
FedEx earnings, Thursday
Japan rate decision, Friday
Euro-zone consumer confidence, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 rose 0.6% as of 8:14 a.m. London time
S&P 500 futures were little changed
Nasdaq 100 futures rose 0.2%
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index was little changed
The MSCI Emerging Markets Index rose 0.4%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro fell 0.1% to $1.1117
The Japanese yen rose 0.1% to 140.42 per dollar
The offshore yuan was little changed at 7.0995 per dollar
The British pound fell 0.1% to $1.3201
Cryptocurrencies
Bitcoin rose 1.6% to $58,579.36
Ether rose 1.2% to $2,301.45
Bonds
The yield on 10-year Treasuries declined one basis point to 3.61%
Germany’s 10-year yield declined three basis points to 2.09%
Britain’s 10-year yield declined three basis points to 3.73%
Commodities
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Jason Scott, Masaki Kondo and Jake Lloyd-Smith.
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