Global government bonds have stabilized after the recent sell-off, and markets are now focused on this week’s critical Federal Reserve meeting. Permission for Nvidia’s second-best AI chips to be exported to China is also on investors’ agenda.
The Reserve Bank of Australia kept interest rates unchanged as expected, but stressed that it does not rule out the possibility of future rate hikes. This shift in tone pushed the Australian dollar to a near three-month high. The central banks of Canada and Switzerland are also expected to keep interest rates unchanged this week.
The statements by Isabel Schnabel, a leading member of the ECB, that the next move is “more likely to be upward,” caused a sharp rise, especially in German bond yields. On Tuesday, tensions eased in the markets; the 10-year German bond yield fell by 2 basis points to 2.84%, while the 10-year US yield fell to 4.15%. European stock markets and US futures rose slightly, while Asian markets traded weakly.Fed in Focus
Concerns about Japan’s fiscal outlook are spreading to global markets, pushing Japanese bond yields higher and creating a delicate atmosphere for the Fed meeting. A 25 basis point interest rate cut is priced in for the meeting concluding on Wednesday, but markets are focusing on the tone and economic projections.
Erica Camilleri of Manulife Investment Management said, “Markets could be surprised in many ways by Powell’s tone, potential dissenting votes, and the projections.”
Furthermore, it remains to be seen whether the new Fed Chairman will approach further rate cuts cautiously or align with President Trump’s expectations for a looser monetary policy.Nvidia Gets Permission from China
The Trump administration’s announcement that it will allow Nvidia to export its second-most powerful AI chip, the H200, to China on the condition that a 25% commission is charged on sales has created diverse movements in technology stocks.
Nvidia shares rose 2% in the preliminary market, while the Hong Kong technology index fell by about 2%.In the foreign exchange market, the euro remained flat at $1.1649, while the pound rose 0.22%. The Japanese yen, despite experiencing a brief weakening following the strong earthquake, stabilized at 156.
Oil Prices Stagnant
Oil prices remained flat after the previous sharp decline, as uncertainty continued regarding the Russia-Ukraine peace talks. Brent crude fell 0.2% to $62.3, while WTI fell 0.3% to $58.69.
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