Stock markets diverge on rates, US election debate watch

Sole scheduled debate between US presidential candidates Harris and Trump is a potentially game-changing moment for US presidential election

By AFP

September 11, 2024

Trader on the floor of the New York Stock Exchange in New York City, USA on March 4, 2024. — AFP

LONDON: Global stock markets diverged Tuesday as traders assessed the outlook for interest rates in the United States and Europe and awaited the US presidential debate.

Wall Street's main indices opened modestly after rallying on Monday following a plunge late last week.

The sole scheduled debate between US presidential candidates Kamala Harris and Donald Trump is a potentially game-changing moment for the 2024 US presidential election.

The tepid US stocks gain "has to do in part with some hesitancy in front of tonight's presidential debate and some hesitation to see if there will be follow through on yesterday's rebound effort," said Briefing.com analyst Patrick O'Hare.

Monday's strong gains on Wall Street followed a slump Friday after disappointing US jobs data rekindled fears the Federal Reserve had waited too long to begin cutting interest rates and the economy could fall into recession.

Investors were also looking ahead to US inflation data due Wednesday.

"Tomorrow's US inflation figures could be the next key test of investor sentiment," noted AJ Bell investment director Russ Mould.

The Federal Reserve is widely expected to cut US interest rates at next week's meeting but debate surrounds whether it will be by 25 or 50 basis points, with some arguing that going for the bigger option could suggest decision-makers are worried.

"Financial markets have shifted their focus from bringing down inflation to shoring up economic growth," said Saira Malik, chief investment officer at asset manager Nuveen.

"Market volatility has climbed amid downside surprises in macroeconomic data -- especially labour market indicators."

Official data in Britain on Tuesday showed wages grew at the slowest pace in two years, indicating that the Bank of England could next week decide against cutting interest rates for a second meeting in a row.

The pound firmed against the dollar and euro on the data, while London's FTSE 100 stock index -- featuring numerous multinationals earning in the US currency -- dropped.

In the eurozone, Paris edged higher and Frankfurt slid in afternoon deals.

The European Central Bank holds a monetary policy meeting on Thursday and is widely expected to deliver another interest rate cut.

Fresh worries about China's economy are also dampening sentiment, with a mixed bag on trade doing little to encourage investors and weighing on oil prices.

Data showed exports jumped in August but imports fell well short of expectations as the country's leaders struggle to boost consumption.

That came a day after news that inflation rose less than expected in July, reinforcing the view that moves to boost consumer demand and business activity have not taken hold.

China's leaders are now facing pressure to unveil fresh stimulus for the world's number two economy, although they have shown little desire to embark on the bazooka-like spending seen during the global financial crisis.

Key figures around 1330 GMT

New York - Dow: UP 0.2% at 40,892.92 points

New York - S&P 500: UP 0.4% at 5,491.15

New York - Nasdaq Composite: UP 0.4% at 16,949.64

London - FTSE 100: DOWN 0.5% at 8,233.17

Paris - CAC 40: UP less than 0.1% at 7,430.52

Frankfurt - DAX: DOWN 0.5% at 18,343.57

Tokyo - Nikkei 225: DOWN 0.2% at 36,159.16 (close)

Hong Kong - Hang Seng Index: UP 0.2% at 17,234.09 (close)

Shanghai - Composite: UP 0.3% at 2,744.19 (close)

Euro/dollar: DOWN at $1.1036 from $1.1041 on Monday

Pound/dollar: DOWN at $1.3071 from $1.3075