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Stocks mixed as Fed looms
Global stocks were mixed on Monday as optimism over Middle East peace talks lifted Asia and Europe while tech and interest-rate jitters weighed on Wall Street, and investors also absorbed the resignation of UK Prime Minister Keir Starmer and the death of former Fed Chair Alan Greenspan.
“Global stocks were mixed on Monday — optimism over Middle East peace talks lifted Asia and Europe”
The Reuters market wrap said the Dow was slightly higher but the S&P 500 was down 0.4% and the Nasdaq was down 1.3%, with Europe up 0.6% and the UK up 0.7%.
In foreign exchange, Reuters reported the dollar at a 1-year high and said USD/JPY hit a 2-year high just under 162.00, before ending U.S. trading around 161.50.
Reuters also tied the day’s rate pressure to U.S. yields, saying 2-year yields were at 4.23% and U.S. yields spiked 5-6 bps higher across the curve.
The same Reuters piece framed the yen move as a test of policy, noting Japan’s yen sank deeper into the 'intervention zone' and that it briefly snapped higher to 161 per dollar.
Lagarde presses yuan talks
European Central Bank President Christine Lagarde urged global discussions on the undervaluation of the Chinese currency as part of macroeconomic imbalances that threaten the world economy.
In Brussels, Lagarde cited research from the International Monetary Fund indicating the Chinese currency, also known as the renminbi, was undervalued by 15 to 16 percent when its nominal exchange rate is adjusted for international differences in inflation.
Lagarde dismissed the idea of a new Plaza Accord to strengthen the yuan, saying the 1985 international agreement to weaken the dollar was made when circumstances were different.
The South China Morning Post quoted Lagarde telling an event in Brussels: "That’s the situation as it is, which justifies completely the fact that there has been, and I hope there will be, further discussions of excessive imbalances, which include a currency aspect to it, between the G7 leaders and beyond."
The same Reuters-linked coverage said the G7 leaders met last week in France, where chronic U.S. deficits and Europe’s underinvestment were also discussed as major macroeconomic mismatches.
Rates, bonds, and policy
As markets digested the day’s political and central-bank headlines, Reuters said U.S. yields spiked 5-6 bps higher across the curve and that the 2-year yield was the highest in 16 months at 4.23%.
“2-year yield highest in 16 months at 4.23%”
Reuters also reported that the U.S. Treasury would sell $69 billion of 2-year notes at auction, keeping attention on the next leg of the rates calendar.
In the background of the yuan debate, Lagarde’s call for G7 talks was framed as addressing trade imbalances that Europe has struggled to compete with, including in sectors like high-end automobiles where Chinese goods are cheaper.
The Global Banking & Finance Review wrap also highlighted a broader market mix, saying oil was down with Brent -3% and WTI -2%, while gold was up 1%.
For the next session, Reuters flagged additional scheduled speakers and data, including European Central Bank Vice-President Boris Vujcic speaking and Bank of England's Alan Taylor speaking, alongside PMIs for Japan, UK, euro zone, and US.
