A quiet and tentative optimism is gracing European markets at the start of the new trading week, with stocks poised for a slightly higher open on Monday.
This fragile calm comes after a turbulent end to the previous week and against a complex global backdrop, as investors digest conflicting economic signals from China and the lingering echo of a pivotal policy hint from the US Federal Reserve.
With US financial markets closed for the Labor Day holiday, Europe is left to set its own tone, and early indications point to a cautious but positive start.
Data from IG suggests Germany’s DAX and Italy’s FTSE MIB will both open around 0.12% higher, with France’s CAC 40 up 0.1%.
The Asian ambiguity: a conflicting signal from China
The session is unfolding against a mixed and somewhat confusing picture from the Asia-Pacific region. The key data point overnight was a set of dueling manufacturing reports from China.
The private RatingDog survey—formerly the Caixin PMI—showed a welcome return to expansion, with a reading of 50.5. However, the official government data, released on Sunday, remained in contraction territory at 49.4.
This divergence paints an ambiguous picture of the health of the world’s second-largest economy, leaving investors to wonder which signal to trust.
The diplomatic thaw: a new partnership in the east
On the geopolitical front, a more clearly positive narrative is emerging. Investors are continuing to assess the significant warming of relations between India and China.
Following a landmark meeting at the Shanghai Cooperation Organization summit, leaders from both nations agreed that they are “development partners, not rivals,” a major diplomatic breakthrough that could have long-term positive implications for regional stability and trade.
The shadow of the Fed: a dovish echo lingers
While the immediate economic calendar in Europe is light, the market is still very much operating in the shadow of last week’s events.
Regional markets closed lower on Friday as traders wrestled with a volley of inflation data.
But the week’s defining moment was a speech from Fed Chair Jerome Powell, which was widely interpreted as dovish-tilting and significantly stoked expectations for an interest rate cut at the central bank’s next meeting on September 16-17.
It is this prospect of easier monetary policy that is providing a quiet, underlying support for equities as a new and uncertain week begins.
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