Respite for US Equities Amidst Global Uncertainty

US equities breathed a sigh of relief amidst concerns over a potential government shutdown and ongoing strikes, leading to a reversal in market sentiment and the dollar's recent winning streak.

Key Factors for Today

• US equities find respite from government shutdown and strikes.
• Dollar's 4-day winning streak comes to an end, impacting gold prices.
• Crude futures drop due to speculation of increased Saudi crude supply.
• Euro Area concerns mount as CPI data drops, raising questions about ECB decisions.
• BOE aims to reduce market risk with new lending facilities for NBFIs.

Market Movers

• US equities witnessed a significant boost on Thursday, countering concerns surrounding a potential government shutdown and ongoing labour strikes.
• After a four-day winning streak, the US dollar faced a substantial setback. This downturn in the currency's value was driven by various factors, including robust Q2 economic growth figures, which maintained a solid pace at 2.1%.
• Speculation regarding an increase in Saudi crude supply to the US led to a 2.2% drop in crude oil futures. This sudden reversal followed a surge in crude prices during the prior day, pushing prices to a fresh high not seen since August 2022.
• The Euro Area witnessed mixed economic sentiment, with optimism growing from a forecasted 91.5 to 93.3. However, concerns deepened as German inflation figures fell more sharply than expected on both yearly and monthly fronts. Similarly, Spanish inflation exceeded expectations. These developments have raised worries that the European Central Bank (ECB) might consider another interest rate hike prematurely.

Economic Calendar

• GB GDP Growth Rate
• French Inflation
• ECB President Lagarde Speech
• EA Inflation Rate
• Italian Inflation
• Canada GDP
• Core PCE, PCE Price Index
• Personal Spending
• Michigan Consumer Sentiment
• Fed Williams Speech

The Big News

Dollar Snaps 4-Day Streak Following GDP Data, But Gold Also Down

The US economy maintained a robust growth rate in Q2, but a deceleration in the price index eased concerns of higher interest rates. Worries about a government shutdown and ongoing strikes weighed on the market, leading to a drop in the dollar's value and a decline in gold prices.

WTI at 1-Year+ High Before 2.20% Drop From Defense Deal Rumours

Crude futures, which recently reached a one-year high, experienced a 2.2% drop as speculation about a geopolitical energy deal involving the US, Saudi Arabia, and Israel raised concerns about increased Saudi crude supply to the US. Prices retreated from their recent peak, focusing attention on the $90 threshold.

EU CPI Data Show Larger Drops, Increasing Worries of ECB Hike

Euro Area economic sentiment improved, but German and Spanish inflation fell more than expected, fuelling worries that the ECB might consider another interest rate hike. The euro strengthened against the dollar, targeting higher levels while facing potential resistance at $1.0488.

BOE Plans to Design Lending Facilities to Reduce Market Risk

The Bank of England is taking proactive steps to establish a permanent lending facility for non-bank financial institutions (NBFIs) amid concerns about rising interest rates and volatile markets. NBFIs now account for a significant portion of financial assets, making this move crucial to prevent market turmoil similar to past crises.