By Nell Mackenzie
LONDON (Reuters) -Euphoria over the September prospect of a U.S. interest rate cut petered out on Monday, sending U.S. share futures lower during pre-market trading as investors refocused on the broader economic picture.
S&P 500 inched 0.2% lower and Nasdaq futures fell 0.3% pointing towards a lower Wall Street open, as of 1258 BST.
Powell’s dovish change of course has prompted futures to price in an 84% chance of a quarter-point rate cut in September, and at least 100 basis points of easing to 3.25-3.5% by the middle of next year.
MSCI’s broadest index of world shares rose 0.1% and held near Friday’s record highs, while in Asia Chinese blue chips closed up over 2% at their highest level since 2022 and Japan’s Nikkei shut 0.4% higher.
The pan-European STOXX 600 index was also 0.2% lower, dragged down by Europe’s renewable stocks after the U.S. government ordered Denmark’s Orsted to halt construction of an offshore wind project near Rhode Island.
The move, deepening woes for the industry and putting Orsted’s plans to raise capital at risk, sent the company’s share price down around a record 17%.
London markets were closed for a holiday, thinning overall trading volumes in Europe.
Shares in Amsterdam-listed JDE Peet’s meanwhile surged roughly 17% after Keurig Dr Pepper agreed a deal to buy the company for 15.7 billion euros ($18.36 billion), a 20% premium to Friday’s closing price.
The European Central Bank is expected to hold rates unchanged in September, sources told Reuters at the weekend. Discussions about further cuts may resume in the autumn if the economy weakens.
“As an investor, you lose an enemy whenever the Federal Reserve pivots because it gives valuations room to become ever more expensive,” said Florian Ielpo, Lombard Odier Investment Managers’ head of multi-assets.
But looking at inventory data for manufacturers, wholesalers and retailers, Lombard Odier’s Ielpo said that while manufacturers had stocked up amid tariff announcements, retailers held little inventory further down the economic food chain.
Companies returning to replenish items from now will discover the true costs of U.S. tariffs, which will likely turn up in third-quarter results, said Ielpo.
Switzerland soon hopes to finalise a new business offer for Washington to ease its tariff burden, which will likely include more defence spending and greater access for U.S. energy interests, two people familiar with the matter said.
Switzerland was stunned when U.S. President Donald Trump this month hit it with 39% tariff rates, some of the highest worldwide.
The Swiss franc crept up 0.1% against a basket of currencies. In broader currency markets, the dollar gained around 0.3% to 147.31 yen after falling 1% on Friday. The euro lost 0.2% to $1.1705, having bounced from a trough of $1.1583 on Friday.
The dollar ticked higher, flattering the outlook for corporate earnings, although increased rate-cut bets also imply policymakers now see more danger of a downturn in employment and the economy.
Euro zone bond yields rose, reversing their fall from late Friday as traders reassessed that Fed-driven move and its impact on Europe.
U.S. cash treasuries did not trade in London on Monday due to the bank holiday.
Market optimism will be tested by a reading on U.S. personal consumption prices on Friday that is expected to show core inflation creeping up to its highest since late 2023 at 2.9%.
Any upside surprise to inflation would also challenge the rally in longer-dated Treasuries, especially given that a whopping $183 billion in new debt is being sold this week.
The influential head of the New York Fed, John Williams, is due to speak later on Monday, and markets will be keen to hear whether he shares Powell’s outlook on policy.
NVIDIA WATCH
Focus is turning to Nvidia’s results on Wednesday, when it is forecast to announce a 48% rise in earnings per share on revenue of $45.9 billion for its second fiscal quarter.
Analysts will be keen to hear more on the outlook for shipments to China and details of the deal with President Donald Trump to pay the U.S. government 15% of the revenue from sales of some advanced chips in the Asian giant.
Trump said on Friday the U.S. would also purchase a 9.9% stake in Intel for $8.9 billion, or $20.47 per share, which represents a discount of about $4 from Intel’s closing share price of $24.80.
Gold steadied as the dollar strengthened, and was last slightly lower at $3,368 an ounce after jumping 1% late last week. [GOL/]
Oil prices were further supported by the lack of progress on talks between Russia and Ukraine, which keeps sanctions on Russian supplies. [O/R]
Brent rose 43 cents to $68.16 a barrel, while U.S. crude added 25 cents to $64.13 per barrel.
(Reporting by Nell Mackenzie; Editing by Dhara Ranasinghe, Shri Navaratnam, Gareth Jones and Jan Harvey)
