The U.S. dollar saw gains after a critical manufacturing report in China signaled the world’s second-largest economy is slowing down. Today’s insight includes a bounce-back for oil prices, economic concerns Down Under, testimony from European Central Bank head Mario Draghi and the world’s reaction to China’s slowing economic growth.
The markets opened up more than 100 points in the first hour of trading as investors seem content to wait out the markets this week ahead of the Federal Reserve's September FOMC meeting, where the central bank will decide whether it will hike interest rates for the first time since 2006.
U.S. consumer spending appeared to grow at a fairly healthy pace halfway through the third quarter, pointing to solid domestic demand that could persuade a cautious Federal Reserve to hike interest rates on Thursday.
European shares gave up the day's gains on Monday, the dollar stalled and oil prices fell as investors positioned for a U.S. Federal Reserve meeting later this week that could see interest rates rise for the first time since 2006.
At the time of this writing on Friday, both oil contracts look poised to finish the week lower. Brent is set to close lower for the second straight week, while WTI is about to snap a two-week winning streak. Despite this week’s losses, both contracts remain above their August lows, keeping bullish hopes alive that prices may have bottomed, even if the probability of such scenario appears to have diminished given the lack of further follow-up buying after that late August rally.
The U.S. economy grew faster than initially thought in the second quarter on solid domestic demand, showing fairly strong momentum that could still allow the Federal Reserve to hike interest rates this year.
China's central bank said on Thursday there was no reason for the yuan to fall further given the country's strong economic fundamentals, helping to restore calm to jittery global markets after it devalued the currency earlier in the week.