The markets are shifting towards the holiday mood

A look at the day ahead in European and global markets from Wayne Cole

It’s been a blessedly quiet start to the week in Asia, with Japan taking a much-needed break for Mountain Day after the Nikkei fell on a mountain of its own last week and sent global markets reeling.

If Tokyo were open, futures suggest the Nikkei would trade about 400 points higher, but still not back to where it was before last Monday’s record low.

Most other Asian stock markets were firmer, led by a 2 percent gain in Taiwan, while Wall Street futures were flat.

The dollar moved around ¥147.00, with yen trade unwinding seemingly over for now. IMM data released last week showed net short positions in USDJPY now at 11,354, down from 184,000 in early July.

Treasury futures are also little changed, while Fed funds futures imply a 49% chance of a half-point rate cut in September, after touching 100% at one point a week ago .

Fed officials effectively quashed talk of a cut between meetings, with Fed Governor Michelle Bowman noting over the weekend that inflation was still uncomfortably above target. She softened her usual hawkish tone enough to admit that rates will have to come down gradually if inflation continues to fall.

Markets will know more about that when US consumer price data is released on Wednesday, with annual core inflation forecast to fall 3.2%, the lowest since April 2021. curve to cut.

Note: Thursday’s July retail sales could surprise on the higher side, given the average forecast is +0.3%, but the range is 0.0% to +0.9%. Results from Walmart and Home Depot this week will provide more color on the state of demand. Also, weekly jobless claims could move markets more than usual, given the unexpectedly sharp decline reported last week.

In geopolitics, the Middle East remains a box, and Israeli Defense Minister Yoav Gallant tells US Defense Secretary Lloyd Austin that Iran is preparing for a full-scale attack on Israel.

The Pentagon made the rare decision to publicly report that Austin had ordered the deployment of a nuclear-powered guided missile submarine to the Middle East. The Pentagon added that Austin also ordered the Abraham Lincoln Strike Group to accelerate its deployment to the region.

Key developments that could influence markets on Monday:

– The German Minister of Economy Robert Habeck, the executive director of RWE, Markus Krebber, are speaking

(By Wayne Cole; Editing by Edmund Klamann)