Latest News

The dollar is struggling to find direction

The dollar was unable to gain any ground on Wednesday due to growing Federal Reserve expectations of rate cuts. Investors were looking at weak U.S. economic data and warnings from corporations about the impact of tariffs.

The EUROSTOXX futures are up 0.5%, indicating that European stocks will open higher. Novo Nordisk, a maker of wegovy, reported a second-quarter growth in sales of 18%. This was below the initial expectations by analysts.

Nasdaq and S&P futures both rose 0.4% after a dip. After the bell, shares of AI chip maker Advanced Micro Devices fell 6.6% on disappointing data center revenue.

Analysts at BlackRock Investment Institute said: "We see risky assets as a tug of war between strong U.S. earnings, fueled by the artificial-intelligence (AI) theme and tariffs that hurt growth but raise inflation."

We remain overweight U.S. stock but become more granular in assessing the impact of tariffs.

Overnight, U.S. stock prices finished lower following the unexpected stagnation of services sector activity in July. Input costs and employment have risen by nearly three years. This highlights the impact of President Donald Trump’s tariff policy.

Tariffs are beginning to impact U.S. earnings, even though they were generally positive in the second quarter.

Taco Bell's parent company Yum Brands missed its expectations due to steep trade duties that impacted consumer spending. Caterpillar also warned of a cost of up to $1.5 Billion this year from U.S. Tariffs.

In Asia, MSCI’s broadest Asia-Pacific share index outside Japan fell by 0.1% while Japan’s Nikkei rose 0.6%. Australia's resource shares rose by 0.8%.

The Hang Seng Index in Hong Kong and the blue chips of China both rose by 0.1%.

Trump said on Tuesday that he would announce tariffs for semiconductors and chips within the next few weeks. The U.S. will initially impose a'small tariff' on pharmaceutical imports, before it increases it significantly in the following year or two.

He said that the U.S. and China were close to a deal on trade, and if one was reached he would be meeting his Chinese counterpart Xi Jinping by the end of the calendar year. He threatened to increase tariffs on Indian goods over their Russian oil purchases.

The Reserve Bank of India held its key interest rate at 5.50%, as expected, on Wednesday. However, the chances of another reduction have increased after the U.S. imposed steep tariffs on Indian imports last week.

On the currency markets, after a disappointing jobs report last Friday that caused markets to price in an almost certain chance of a Fed rate cut in September, the dollar has stabilized.

The dollar index (which measures the U.S. Dollar against six counterparts) was unchanged at 98.73 this week, after Friday's fall of 1.4%.

FedWatch from the CME shows that Fed funds futures indicate a 94% probability of a rate reduction next month. At least two cuts are priced in this year.

Investors await Trump's choice to fill the upcoming vacancy at the Fed Board of Governors. Trump announced that a decision would be made shortly, but ruled out Treasury Secretary Scott Bessent, who is currently the Fed Board of Governors' chief and whose tenure ends in May 2026.

Treasury yields rose after a $58 Billion auction of 3-year notes failed, but they remained near their multi-month lows. This week, the market will see more supply with $42 billion of 10-year notes and $25 billion of 30-year bonds.

The yields on two-year Treasury bonds rose by 2 basis points, to 3.7323%. They had risen by 3.5 basis points overnight. Meanwhile, the benchmark 10-year bond yields increased 3 bps, to 4.2217% after remaining unchanged overnight.

Oil prices have risen on commodity markets after four consecutive sessions of declines. U.S. crude oil rose 0.6% to $65.57 a barrel while Brent crude was up 0.6% at $68.07 a barrel.

Trump said Tuesday that he would decide whether or not to sanction countries who purchase Russian oil following a scheduled meeting with Russian officials on Wednesday.

The spot gold price fell 0.3%, to $3.370 per ounce.

(source: Reuters)