Global markets opened the week on a high note, fueled by stronger than expected economic data. Optimism surrounding international trade relations boosted the positive sentiment. Investors reacted excitedly to news that US inflation indices came in softer than expected. This favorable data fueled new hopes for potential Fed interest rate cuts.
The most recent inflation report brought news that inflation came in well below economists’ expectations. This has sparked new hope among investors for a more dovish monetary stance. Many analysts are already daring to hope that inflation has peaked. If that does not come to pass, the Federal Reserve might need to intervene with reduced interest rates to stimulate the economy.
Aside from the continuing positive inflation data, optimism resulting from US-Chinese trade discussions has fueled this bullish perspective. New talks between the two economic juggernauts have begun. Optimism building optimism that a new Sino-U.S. agreement might be the breakthrough needed to de-escalate the 18-month long trade war. As the International Monetary Fund has pointed out, a positive outcome would provide a huge boost to global economic stability.
European markets echoed this optimism, as many national indices hit all-time record highs. Photo credit: iStock/andreypopov The Stoxx Europe 600 index jumped after the improving US picture proved contagious, and European investors rushed to join the party. Beyond that, they were feeling very positive about things getting better on the trade front. In a parallel move, Japanese stocks hit new highs, spurred by positive export figures and a generally supportive economic backdrop.
This week should be very interesting indeed, as the first full week of October is filled with important earnings periods from some of the largest U.S. corporations. Investors will be keeping a hawk eye on these reports for clues about corporate health and future performance as fortunes shift with the macroeconomic winds. Major companies across sectors are expected to unveil their quarterly earnings, which could further influence market direction.
Additionally, central bankers’ policy decisions are dominating the calendar this week. Apart from the Fed, analysts expect fireworks from three other global central banks including the European Central Bank and the Bank of Japan. These announcements are always closely watched for important signals about the direction of monetary policy and can have dramatic effects on investors expecting certain outcomes.
Aside from earnings and central bank meetings, tensions from hot US-China trade talks will be the talk of the markets. Stakeholders are watching closely to see what happens next. They are looking to their leaders to see tangible signs of progress on major trade disputes and greater cooperation between countries.