U.S. equities demonstrated positive momentum on Monday morning, with investors anticipating a week marked by significant data releases related to inflation and employment. This follows Federal Reserve Chairman Jerome Powell's cautious stance expressed during the previous week.
Investors continued their momentum from the previous Friday, propelled by Chairman Powell's remarks. Powell emphasized that the decision on further tightening of monetary policy was still under evaluation, underscoring persistently elevated inflation levels and indicating readiness for rate hikes if deemed necessary.
Allan von Mehren, Chief Analyst at Dankse Bank, noted that Powell's statements did not significantly alter the landscape. Those who anticipate an early pivot by the Fed in the coming year and those holding opposing views both found reasons to support their stance. This resulted in equities, particularly U.S. equities, exhibiting strength.
Furthermore, Powell's comments did not dampen investor enthusiasm for large-cap growth stocks. Within the market, sectors such as consumer discretionary and technology outperformed, favoring larger caps over smaller ones, and growth over value-oriented stocks.
Rod von Lipsey, Managing Director at UBS Private Wealth Management, pointed out that Powell, while leaving the possibility of further rate hikes on the table, reaffirmed the central bank's commitment to containing inflation at its targeted 2% level. In this context, the upcoming core PCE figures for July and the mid-September CPI report will play a critical role in shaping expectations for the Fed's actions in late September.
Attention will also be directed towards the impending data releases, including the July personal consumption expenditure index and the August payroll data. The conclusion of August brings to light the S&P 500's 3.9% decline, marking its first monthly loss since February. Similarly, the Nasdaq Composite, down over 5% for August, is also poised for its first monthly loss since February.
Additionally, Treasury yields, specifically the 10-year note, experienced a mild decline of around 2 basis points to 4.212%.
In China, stocks experienced upward movement following measures implemented by the Finance Ministry and the country's stock market regulator. These initiatives included a reduction in the tax on stock trades and restrictions on sales by significant shareholders in companies with inadequate dividend distributions. Notably, the CSI 300 climbed by over 1%. However, the return of the indebted property developer China Evergrande Group to trading in Hong Kong resulted in a substantial 78% decline.
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