U.S. and European stocks edged higher on Monday after weak economic data from the euro zone curtailed momentum from last week.
Stocks rose after the Federal Reserve announced its first significant interest rate cut since 2020 on Wednesday as inflation continues to fall toward its long-term target of 2%.
On Wall Street, the Dow Jones Industrial Average and the S&P 500 index hit new records, continuing their upward trend on hopes of further monetary easing by central banks in the coming months.
Karl Hering of LBBW said the easy monetary policy was “supportive for stock markets” and predicted a weakening in the labor market could lead Fed officials to cut rates more quickly.
London and Paris closed slightly higher on Monday, while Frankfurt finished with a healthy 0.7% gain.
– Awaiting US inflation data –
Friday’s release of personal consumption expenditures data — the Fed’s preferred inflation gauge — could shed light on the Fed’s next interest rate moves, as could several speeches by senior Fed officials scheduled for this week.
Atlanta Fed President Raphael Bostic said Monday that the Fed’s interest rate decision last week puts the bank in a strong position no matter what the economic winds blow through in the coming months.
“In my view, the 50 basis point adjustment made at last week’s meeting puts us in a better position should the risks to our mandate turn out to be more disproportionate than I believe,” said Bostic, one of 12 voting members of the Fed’s interest rate committee this year.
“The Committee could slow the pace or even halt further rate cuts if my optimistic view on inflation is not met,” he said.
On the other hand, if the labor market turns out to be less healthy than it appears at the moment, “a half-percentage point cut would put the economy in a better position to adjust than a more modest cut,” Bostic added.
– Eurozone business activity slows –
European traders were pricing in a report that euro zone business activity fell for the first time in seven months in September and expectations that the weak data would increase the likelihood that the European Central Bank would accelerate its own interest rate cuts.
“French and German PMI data was generally weak,” said Kathleen Brooks, research director at XTB.
The S&P Global Purchasing Managers’ Index (PMI), a key gauge of the overall health of the economy, fell to 48.9 in September from 51 in August. A reading below 50 indicates an economic recession.
Despite the weak data, European stocks were supported by growing hopes of an interest rate cut by the ECB.
“September’s PMI data could add urgency to the ECB’s rate cuts for the rest of the year,” Brooks said.
In corporate news, the German government announced it would oppose a takeover of Germany’s Commerzbank after Italian financial institution UniCredit increased its stake in the bank to 21%, making it the bank’s largest shareholder.
Shares in both banks ended lower on the news.
Oil prices fell as worries about slowing Chinese demand outweighed fears of an escalation in the Middle East conflict after Israel attacked Lebanon on Monday.
Gold prices have also been trading near record highs since the Fed cut interest rates, making the precious metal more attractive to traders, and ongoing geopolitical concerns amid rising tensions in the Middle East have also supported gold prices.
– Key figures around 2030 GMT –
New York – Dow: up 0.2% to 42,124.65 points (closing price)
New York – S&P 500: up 0.3% to 5,718.57 (close)
NEW YORK – The Nasdaq Composite Index rose 0.3% to 17,998.97 (closing price).
London – FTSE 100: up 0.4% to 8,259.71 (close)
Paris – CAC 40: up 0.1% to 7,508.08 (close)
Frankfurt – DAX: up 0.7% to 18,846.79 (close)
Tokyo – Nikkei Stock Average: Closed for holiday
Hong Kong – Hang Seng Index: down 0.1% to 18,247.11 (close)
Shanghai Composite Index: Up 0.4% to 2,748.92 (closing price).
EUR/USD: down from 1.1160 to 1.1113
Pound sterling/dollar: up to $1.3345 from $1.3316 on Friday
USD/JPY: down from 144.02 to 143.57
EUR/GBP: down from 83.80p to 83.27p
Brent crude: down 0.8% to $73.90 a barrel
West Texas Intermediate: down 0.9% to $70.37 a barrel
gv/cw/da-jmb/bjt
