Major share markets turned hesitant on Monday, while the dollar and bond yields sagged ahead of inflation data that could pave the way for rate cuts in the United States and Europe, while Wall Street braced for earnings from AI darling Nvidia (NASDAQ:NVDA).
Oil prices climbed after Israel and Hezbollah traded rocket salvos and air strikes on Sunday, stirring worries about possible supply disruptions if the conflict escalated.
Brent rose 81 cents to $79.83 a barrel as of 0701 GMT, while U.S. crude added 80 cents to $75.63 per barrel. [O/R]
Europe's broad Stoxx 600 index was flat in very early trading, while MSCI's broadest index of Asia-Pacific shares added 0.5%.
S&P 500 futures and Nasdaq futures were both slightly lower in slow trade. [.N]
UK marekts were closed for a holiday.
Nvidia reports on Wednesday to sky-high market expectations.
The stock is up some 150% year-to-date, accounting for around a quarter of the S&P 500's 17% year-to-date gain.
"Nvidia will beat consensus expectations, they always do, but investors are so ingrained in seeing revenue come in $2 billion-plus above the analysts' consensus or we could easily see a sell the news event," said Chris Weston, head of research at broker Pepperstone.
That means Nvidia would have to report sales of $30 billion or more and guidance for the third quarter of $33 billion or above, he added.
In mixed Asian stock markets on Monday, Japan was a notable underperformer, with the Nikkei closing 0.66% lower as a stronger yen pressured exporter stocks.
The yen has jumped on a broadly weaker dollar after Federal Reserve Chair Jerome Powell said the time had come to start easing policy and emphasised the central bank did not want to see further weakening in the labour market.
"Importantly there was a notable absence of caveats such as 'gradual/gradualism' as used by other Fed officials," noted Tapas Strickland, head of market economics at NAB.
"The jobs report on September 6 is clearly important as Powell is willing to cut rates to ward off downside risks to employment and to maintain a strong labour market," he added. "In summary, Powell has increased the chances of a soft landing."
Figures on U.S personal consumption and core inflation are due on Friday, along with a flash reading on European Union inflation. Analysts generally assume the data will be benign enough to allow for rate cuts in September.
Fed fund futures are fully priced for a quarter-point cut at the Sept. 18 meeting, and imply a 38% chance of an outsized move of 50 basis points. The market also has 103 bps of easing priced in for this year and another 122 bps in 2025.
"We continue to expect the FOMC to deliver an initial string of three consecutive 25bp cuts at the September, November, and December meetings," said analysts at Goldman Sachs.
"Our forecast rests on our assumption that the August employment report will be stronger than the July report, but we continue to think that if instead the August report is weaker than we expect, then a 50bp cut would be likely."
Markets are also fully priced for a quarter-point cut from the European Central Bank next month, and a total 163 basis points of easing by the end of 2025.
Yields on two-year Treasuries fell an additional 2.5 bps to 3.8872% on Monday, having fallen almost 10 bps on Friday, while 10-year yields sagged a further 2.5 bps to 3.7820%. [US/]
The dollar slid a further 0.53% to 144.685 yen, having fallen 1.3% on Friday. The euro edged down slightly to $1.1181, but remained just off a 13-month top. The Swiss franc firmed to 0.84655 per dollar. [USD/]
A softer dollar combined with lower bond yields to underpin gold at $2,515 an ounce, and near an all-time peak of $2,531.60. [GOL/]
