- Global stocks pause for breath after a week of recovery.
- FTSE 100 opens lower after disappointing Chinese investment data.
- Dollar dips as interest rate cuts are eyed and yen rises on rate hike expectations.
- Gold reaches record level as Middle East ceasefire talks are in focus.
- Kamala Harris set to be endorsed, and Democrats hope for fresh momentum.
- Barratt pushes on with Redrow acquisition as Rightmove data shows surge in buyer inquiries.
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’Stocks look set to struggle for a sense of direction at the start of a week dominated by ongoing conflicts and US domestic politics, while China’s economic difficulties come into focus again. The FTSE 100 has opened lower, as investors assess fresh data indicating a further fall in foreign direct investment in China, with an acceleration in the pace of the decline. The precariousness of the latest talks in the Middle East amid high tensions between Russia and Ukraine may also be weighing on sentiment.
The pause for breath comes after a week of sharp recovery, boosted by hopes that the US economy will avoid a hard landing, while an orderly but rapid reduction in interest rates looks set to unfold. The expectation of lower borrowing costs in the US has pushed the dollar lower against a basket of currencies, while the yen has gained ground on expectation of another interest rate hike from the Bank of Japan, which has weighed sharply on the Nikkei. Minutes from the Fed, out later this week, will be closely watched for further clues about the monetary policy path. But it will be Fed Chair Jerome Powell’s speech on Friday at the central bankers meeting in Jackson Hole that will be the big draw, as he’s expected to cement expectations for a quarter of a percentage point cut in September, and more reductions are likely to follow by the end of the year.
The weakening dollar, combined with concerns about high geopolitical tensions, have conspired to push gold prices to record levels of $2,502 per ounce. While a lower dollar helps boost demand for the commodity, the uncertain outcome of ongoing conflicts is also pushing up appetite for the safe haven asset. Ukraine’s incursions into Russia continue, with unknown repercussions, and as negotiations for a ceasefire in the Middle East look set to reach a decisive moment, violence continues to erupt in Gaza and Israel.
The start of the Democratic Convention in Chicago is expected to draw big crowds of protestors against Biden’s support of Israel’s offensive, while behind the scenes, the administration is believed to be piling pressure on Netanyahu to stay in the talks. Kamala Harris is due to be officially endorsed as the party’s Presidential candidate on Thursday, and as she basks in the media spotlight this week, there are hopes among Democrats that the current momentum surrounding her campaign will rev up again. There is likely to be a fresh temporary boost to national poll ratings, but gaining steady support in a handful of battleground states is the real prize the Democrats seek.
As hopes for a breakthrough in the Middle East are kept alive, oil prices have dipped back a little, but concerns about China’s slowing economy are also likely to be weighing on prices. The ongoing fall in foreign direct investment is another piece of a jigsaw indicating continued obstacles in the path of recovery for the world’s second largest economy. Brent crude is hovering around $79 a barrel as bets increase of lower demand from China.
It’s all systems go for the Barratt’s acquisition of Redrow Homes by the end of the week. The Competition and Markets Authority had flagged concerns about the impact on pricing and the quality of homes in one area in Shropshire due to the takeover. But it appears that the measures put forward to address the issues flagged are considered to be a sufficient workable solution. The company is clearly super-keen to get the deal over the line so it can capitalise on an expected upswing in demand for new homes with fresh interest rate cuts on the horizon by the end of the year. Data out from Rightmove indicate that the August rate cut has already started to incentivise potential purchases, with estate agent inquiries surging 19% this month compared to a year ago.”
