It’s been another relatively flat session for equity markets, with investors seemingly having one eye on the Fed and ECB later in the week despite a strong showing in Chinese stocks earlier in the day.
They were lifted by the promise of Chinese stimulus following the Politburo meeting this week and some potential relief for the property market. It’s been a tougher re-emergence from zero-Covid than many anticipated, with consumers still seemingly holding back and the property sector still reeling from the previous crackdown.
The enthusiasm hasn’t filtered through to Europe and the US though, perhaps due to the lack of detail currently on the stimulus measures, but also the distraction of the central bank meetings over the next 48 hours. Progress on inflation could mean both the Fed and ECB are about to announce their final rate hikes of the tightening cycle; the question is will they acknowledge that or maintain a hawkish position over the rest of the summer?
Unilever rallies amid hints at price pressures easing
Unilever is among the top performers on the FTSE 100 today, buoyed by a surge in profits in the last quarter. It comes at a challenging time when high inflation is pushing up costs and there is a growing spotlight on producers and supermarkets amid claims of profiteering.
What’s more, the cost-of-living crisis is pushing consumers toward cheaper own-brand products which partly contributed to a decline in sales volumes. The company did reassure investors that pressures are easing though which should be good news for households and the share price is also reaping the rewards, up around 5%.
Chinese stimulus hints do little to boost Oil prices further
Oil prices barely changed on Tuesday, after appearing to have been little impacted by the promise of new Chinese stimulus. This further supports the view that the lack of detail is stalling any reaction in the markets and that only once we get that can we determine how effective it will be in stimulating demand.
We’ve already seen some powerful gains over the last four weeks, with Brent up almost 15% from its late June lows. That was driven by cuts from Saudi Arabia and Russia and then better economic readings elsewhere that supported the case for a soft landing following a very aggressive monetary tightening cycle.
Gold pares gains as traders await Fed position on further rate hikes
Gold is hovering around $1,960 ahead of the Fed decision, having pared recent gains over the last four sessions. It came close to $2,000 but traders appear to have opted to hold off considering how influential the central bank could be in the next big move in the yellow metal.
Another 25 basis point rate hike is basically fully priced in at this stage, it’s now a question of whether they will signal more to come or adopt a less hawkish position. The dot plot last month indicated two more rate hikes were likely, with one policymaker favouring four, but recent data may have changed that. They won’t close the door entirely on tightening further but they could hint at being done for now.
