Global Markets Remain Stable Amid Earnings Anticipation and Central Bank Meetings | Daily Market Analysis

Key events:

• Australia - RBA Interest Rate Decision (Aug)
• UK - S&P Global/CIPS UK Manufacturing PMI (Jul)  
• USA - ISM Manufacturing PMI (Jul)
• USA - JOLTs Job Openings (Jun)

On Monday, Wall Street and global stocks showed minimal changes, remaining relatively stable. However, oil prices experienced some gains, and the dollar remained mostly steady. Traders were focused on upcoming corporate earnings, central bank meetings, and an important employment report scheduled for this week.

The Dow Jones Industrial Average saw a slight increase of 0.11% to reach 35,499.78, while the S&P 500 remained almost unchanged at 4,582.45. The Nasdaq Composite also saw a modest gain of 0.07%, reaching 14,326.87.

This week, notable companies such as Apple Inc (NASDAQ: AAPL) and Amazon.com (NASDAQ: AMZN) are set to release their earnings reports on Thursday. Additionally, results are expected from well-known companies like Caterpillar Inc (NYSE: CAT), Starbucks Corp (NASDAQ: SBUX), and Advanced Micro Devices (NASDAQ: AMD).

European markets had a positive session, wrapping up a strong month of gains. The DAX achieved yet another record high, while the CAC 40 also rebounded strongly after experiencing a significant two-day sell-off just under a week ago.

The FTSE100 performed quite well, reaching a two-month high, and this positive momentum was particularly notable for housebuilders. They experienced a rebound in their stock prices as expectations for interest rate hikes subsided from the peak levels observed a few weeks ago.

The positive momentum in global markets seemed to be influenced by substantial gains in Chinese equity markets. Chinese policymakers have indicated their intention to implement measures to bolster the economy in the upcoming weeks.

Once again, the Japanese yen demonstrated weakness today as the Bank of Japan made unexpected moves to buy bonds in an effort to lower yields. This decision came after the 10-year JGB yield surged above 0.6%, surpassing the central bank's upper target of 0.5%. As a result, the yen slid to a three-week low against the US dollar.

In contrast, the Australian dollar experienced a significant increase, driven by short covering ahead of tomorrow's RBA rate meeting. Traders speculated that the central bank might raise rates by another 25bps. Initially, the consensus was for the RBA to maintain rates unchanged, but weaker-than-expected Q2 CPI figures from last week suggested that the necessary adjustments had already been made. Despite a slight decline from 5.5% to 5.4% in annual inflation, which is still relatively high, the unemployment rate at 3.5% could entice the RBA to raise rates from 4.1% to 4.35%. However, with PMIs indicating contraction, there is a risk that such a move could be precarious.

This week, attention is also on the pound as Thursday approaches, which marks the Bank of England's rate decision. It is widely anticipated that another rate hike will occur, with the only uncertainty being whether it will be 25bps or 50bps. Today's mortgage approvals data for June suggested robust demand, but this could be attributed to strong interest in fixed rate rollovers, as net lending only saw a modest increase of £0.1bn.

Gold prices are poised to reverse their losses from June, although they have yet to breach the resistance level of $2,000 an ounce. The depreciation of the US dollar has helped lift gold prices off their lows. Despite firmer long-term yields, markets are starting to accept the notion that US interest rates are likely to remain elevated for an extended period.