Risk sentiment improved as recession fears abated
Wall Street stocks climbed on Friday to register the best week of 2024 as investor sentiment continued to recover after a massive sell-off earlier in the month. The S&P 500 added 0.2%, the Nasdaq Composite gained 0.21%, and the Dow Jones Industrial Average rose 0.24%. ahead of the weekend, investors continued to digest solid US retail sales data as the figures came in much stronger than expected, while weekly jobless claims fell. Against this backdrop, recession fears abated, especially as inflation readings bolstered hopes for a soft-landing scenario. For the week, the S&P 500 added nearly 4%, the Nasdaq gained over 5%, while the Dow advanced almost 3%.
In Asia, equities were mixed on Monday as investors were cautious ahead of this week’s events, including Powell’s speech at Jackson Hole symposium. Japan’s Nikkei 225 ended 2% lower after data showed the core machinery orders fell 1.7% year on year in June. Australia’s S&P/ASX 200 edged 0.12% higher, the Kospi in Seoul lost 0.86%, Hong Kong’s Hang Seng added 0.75%, while the Shanghai Composite was up 0.5%. In general, risk demand persisted at the start of the week as recession risks keep abating. Of note, Goldman Sachs at the weekend trimmed the probability of a US recession in the next year to 20% from 25%.
In Europe, stocks opened mixed today, with US stock index futures trading slightly lower in early pre-market deals. In part, a subdued start following last week’s sharp rally is due to a wait-and-see mode in the markets as investors now await further clues on the US economy from the Federal Reserve’s Jackson Hole economic symposium. The Stoxx Europe 600 Index was flat in early deals on Monday after posting the strongest weekly gain since May. European business activity data due this week will give investors more insights on the state of the economy.
Meanwhile, the US dollar slipped to fresh 2024 lows to start the week on a bearish note. The USD index dipped to the 102.00 figure that has been capping losses so far. The buck continues to lose ground following dovish comments from Fed officials, which have heightened expectations for a September interest rate cut. The greenback is also pressured by a stronger yen as market participants expect the BoJ to implement another rate hike in the near term. If the 102.00 support zone gives up in the near term, the price will target the low of 101.35.
