SYDNEY/LONDON — Global shares traded steadily near record highs on Monday ahead of an action-packed week that looks certain to see the US Federal Reserve resume its easing cycle, and perhaps leave the door wide open to a series of cuts.
The Bank of Canada is also expected to cut rates by a quarter point this week, while the Bank of Japan and the Bank of England are both expected to hold rates steady.
MSCI’s all-country index hovered just shy of last week’s record highs, while stocks in Europe rose 0.3 percent and S&P 500 futures and Nasdaq futures were both steady.
Markets are 100 percent priced for an easing of 25 basis points from the Fed, taking its funds rate to 4.0-4.25 percent, with futures implying just a 4 percent chance of 50 basis points.
Just as important will be Fed members’ “dot plot” projections for rates and guidance from Fed Chair Jerome Powell on the extent and pace of any further easing.
Futures already have 125 basis points of cuts priced in by late 2026, so anything less than dovish will disappoint investors.
“The key question for the September FOMC meeting is whether the Committee will signal that this is likely the first in a series of consecutive cuts,” said David Mericle, chief US economist at Goldman Sachs.
“We expect the statement to acknowledge the softening in the labor market but do not expect a change to the policy guidance or a nod to an October cut.”
US President Donald Trump continued his attacks on the central bank on Sunday, saying Powell was incompetent and hurting the housing market.
“Uncertainty surrounding the future path for Fed policy means that some traders are now bracing for volatility around Wednesday’s Fed decision, with options markets pricing in a 1 percent swing in either direction, which would be one of the biggest daily moves in weeks,” XTB research director Kathleen Brooks said.
Meanwhile, the euro offered little reaction to Fitch’s downgrade of France.
The single currency edged up 0.1 percent to $1.1738 , a short way from its recent top of $1.1780. It was a touch weaker against sterling, trading at 86.33 pence, down 0.2 percent on the day .
US stocks ended mixed on Friday, with the Dow dropping about six-tenths of a percent, the S&P 500 closing essentially flat, and the Nasdaq gaining more than four-tenths of a percent to record another record closing high.
The euro has been underpinned by a steady outlook for EU rates, with the European Central Bank signalling last week it was in a “good place” on policy. A host of ECB officials are due to speak this week, including President Christine Lagarde.
Elsewhere, the dollar eased 0.2 percent against the yen to 147.42 , while the Norwegian crown rose to multi-month highs against the euro and to a 2023 high against the dollar ahead of the Norges Bank policy meeting later this week.
In Asian markets, Chinese blue-chip shares rose 0.2 percent, as did Hong Kong’s Hang Seng index as investors redoubled bets on Chinese tech shares amid Sino-US trade talks.
Talks between US and Chinese officials on their strained trade ties on Monday entered a second day in Madrid. Trump said he was still negotiating on the divestiture deadline for Chinese short-video app TikTok.
Data released on Monday showed the Chinese economy lost some momentum in August, with a slew of activity indicators – from industrial output to retail sales – coming below forecasts. Falls in property investment deepened, while home prices declined another 0.3 percent in August, extending a downward trend that has persisted since early 2023.
