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As investors digested the news of a potential rate cut from the United States’ Federal Reserve in the coming months, European markets saw a correction on Monday morning. Benchmark stock indexes dipped into negative territory except for the FTSE 100, which remained closed because of a bank holiday in the UK.
The Dax in Frankfurt lost 0.4% soon after the opening, the CAC 40 in Paris dipped by 0.6%, the Madrid IBEX 35 was down by more than 0.4% and the European benchmark STOXX 600 decreased by 0.3% after 10.00 CEST.
At the same time, the euro was slightly down against the US dollar, with the exchange rate at 1.1707.
Turning to market outliers, Danish energy company Orsted shares saw its shares fall to a record low, losing more than 17% of their value in Copenhagen. This came after the US administration halted the company’s offshore wind farm construction project called Revolution Wind on Friday, raising alarm among the company’s investors.
Meanwhile, JDE Peet’s shares soared more than 17% on the news that Keurig Dr Pepper would buy the Dutch coffee company in a €15.7 billion deal.
Asian trade followed US rally
The movements followed a cheerful trading session in Asia, where shares advanced on Monday, tracking Wall Street’s rally after the head of the Federal Reserve hinted that interest rate cuts may be on the way.
Fed chair Jerome Powell said on Friday at an annual conference in Jackson Hole, Wyoming, that he is aware of risks to the labour market — which could prompt faster rate cuts.
A surprisingly weak report on job growth this month has led many traders to expect a cut as soon as the Fed’s next meeting in September, after months of pressure from US President Donald Trump for lower rates.
Hong Kong’s Hang Seng index jumped 1.9% by the close, and the Shanghai Composite index surged 1.5%. The latter is trading at its highest level in a decade, despite worries over higher tariffs on exports to the United States under Trump and weak domestic demand at home.
Tokyo’s Nikkei 225 gained 0.4%, and the Kospi in South Korea climbed 1.3%.
“Asia is set to rally in catch-up mode, feeding off Wall Street’s Friday rebound after Powell cracked the door open to rate cuts,” Stephen Innes of SPI Asset Management said in a commentary.
In other dealings on Monday morning, US benchmark crude oil gained 0.4% and was traded at $63.92 per barrel at around 11.00 CEST, while Brent crude, the international standard, added 0.25% to $67.39 per barrel.
The US dollar rose to 147.24 Japanese yen from 146.88 yen.
Gold prices inched lower, by 0.2% to $3,410 an ounce.
What to look out for this week
Nvidia’s earnings report, due on Wednesday after markets on Wall Street close, is a key focus of attention this week.
The firm’s role as a key supplier of chips for artificial intelligence, along with its heavy weighting, give it outsized influence as a bellwether for the broader market.
In Europe, inflation figures from France, Germany, Italy and other key European countries will be released on Friday.