The Central Bank of Sweden has kept the rate at 3.75% and expects 2-3 reductions in the second half of the year

The Central Bank of Sweden (Riksbank) kept its key interest rate at 3.75% per annum at its meeting on Thursday. This decision coincided with analysts' expectations.

It is noteworthy that in May, the regulator lowered the rate for the first time in eight years.

Riksbank noted that inflation is approaching the target 2%, and long-term inflation expectations are stabilizing. There is also a moderate increase in salaries.

The regulator’s management plans, while maintaining the current trajectory of inflation, to reduce the rate two or three times in the second half of the year.
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The growth of public debt in the world's largest economies worries financial markets

The victory of the left-wing coalition in the French elections forced investors to pay attention to the country's financial problems. The budget deficit remains high at 5.5% of GDP, and the EU forecasts debt growth to 139% of GDP by 2034.

In the United States, the national debt is expected to grow from 97% to 122% by 2034. Donald Trump's popularity on the eve of the election is also worrying investors. They fear that his victory, especially under a Republican Congress, could lead to an increase in budget deficits and inflation.

Italy is facing EU disciplinary measures due to a budget deficit of 7.4%, which is the highest in the EU.

In the UK, the 2022 tax cuts caused the pound sterling and government bond prices to fall, forcing the central bank to intervene. The new Labour government, promising economic growth under tight control, is facing the problem of public debt, which is close to 100% of GDP.

Japan's national debt is more than twice the size of its economy – 261% of GDP. However, the bulk of the debt belongs to domestic investors, which reduces the risk of massive capital outflows.
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Brent fell to $78.40 per barrel

On Tuesday morning, oil prices continued to decline moderately after a sharp drop the day before. The current price of Brent oil is $78.36 per barrel, North American WTI oil is trading near $75.08. In yesterday's session, both brands ended in the red for the third week in a row.

Analysts note that oil prices have declined due to concerns about demand in China, the world's largest oil importer. Markets were shaken by a series of negative economic news from China: manufacturing activity in the country probably declined for the third month in a row in July.

The market's attention is also focused on the upcoming meeting of the Chinese Politburo, where decisions can be made on further support for economic policy. However, expectations from this event are low, as the Third Plenum, a key political meeting in mid-July, mostly confirmed current economic goals and failed to improve market sentiment.

In addition, oil fell by 2% after Israel announced that its response to Hezbollah's missile strike on the occupied Golan Heights would be thought out in such a way as to avoid dragging the Middle East into a full-scale conflict.

It also became known that weekly oil supplies from Russia fell to the lowest level since the invasion of Ukraine in 2022.

Tomorrow, you should pay attention to the publication of the report of the US Department of Energy. It is expected that it will show a reduction in oil reserves in the country by 3.9 million barrels. And if the reduction is greater than expected, it may support oil prices. On Monday, the US Department of Energy announced the purchase of 4.56 million barrels of oil for the strategic reserve.
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Oil prices are rising on concerns about the conflict between Israel and Hamas

Oil prices rose during Asian trading on Thursday, continuing the sharp rise of the previous session. The escalation of tensions in the Middle East following the assassination of the Hamas leader in Iran has increased fears of a possible large-scale war in the region.

The oil market is reacting to an increase in risk premiums related to fears of revenge by Hamas for the assassination of the organization's leader Ismail Haniyeh in Tehran on Wednesday. Although Israel has not claimed responsibility for the attack, many believe Jerusalem is behind the attack. The rising tensions have raised fears that a full-scale war in the Middle East could disrupt oil supplies from the region, which in turn could affect global markets.

Traders' attention is also focused on today's OPEC+ meeting, where information about oil production plans may be disclosed. According to media reports, no changes in the cartel's production volumes are expected, despite the recent decline in oil prices to almost two-month lows. Nevertheless, leading producers such as Saudi Arabia and Russia are likely to remain cautious about further production cuts.

The current price of Brent oil is $81.60 per barrel. North American WTI oil is trading near $78.60. Oil quotes also received support after the publication of data on a significant decrease in oil reserves in the United States for the fifth week in a row, due to high demand for fuel during the summer period of active travel.
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Gold is moving away from highs amid the growth of the stock market

The price of gold fell from near record levels during Asian trading on Tuesday. The recovery of stock markets led to a decrease in demand for reliable assets, although instability in the markets still supported relatively high prices for the precious metal.

Yesterday, gold soared to a historic high due to the collapse of stock markets caused by fears of a recession in the United States and expectations of lower interest rates.

December gold futures fell 0.3% to $2402.57 per ounce. At the beginning of the week, the spot price reached $2,460 per ounce.

On Tuesday, gold weakened slightly amid the strengthening of the dollar and the growth of the stock market. Nevertheless, gold has maintained much of its recent growth as the prospect of lower interest rates continues to support interest in it.

The rise in gold prices has led to an increase in prices for other precious metals, but in recent sessions they have suffered significant losses, since their attractiveness as a "safe" asset is inferior to gold.

Silver futures fell 0.7% to $27.020 per ounce, and platinum futures fell to $918.85 per ounce. Copper prices fell 0.6% to $8,806.50 per tonne, and one-month futures fell almost 1% to $3,9660 per pound.
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European stocks are losing ground amid uncertainty

European stocks resumed their decline after two days of gains, under pressure from mixed earnings reports and uncertainty about the economic development of the United States.

The iShares STOXX Europe 600 index fell 0.9%, rolling back from last Wednesday, which was the best day for the index since November. Real estate and technology stocks were under the most pressure, while telecommunications stocks rose slightly.

Siemens AG lost ground after forecasting revenue and profit growth below expectations, Zurich Insurance Group AG declined due to increased losses in the property insurance division. Among the leaders of the day were Enter PLC, which raised its forecast for the full year, and Allianz SE, which posted higher profit figures.

The beginning of August was unstable for European stocks due to concerns about the recession in the United States. Despite this, the overall picture of profit reporting looks relatively optimistic: earnings per share growth for the MSCI Europe index is 2.4%, higher than the forecast of 0.4%.

Despite the fact that experts do not expect sharp drops in the market, they advise investors to be careful due to geopolitical instability. Technical analysis indicates the possibility of short-term growth in European stocks, but trading will remain volatile until economic data signals a "soft landing" of the US economy.
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Brent rose above $80 per barrel

Oil prices have been rising for the fifth consecutive auction due to concerns about possible supply disruptions amid the escalation of the conflict in the Middle East.

Barbara Lambrecht, commodity analyst at Commerzbank, noted that geopolitical tensions could intensify at any moment, which would put additional pressure on price growth. Geopolitical risks are likely to remain a key factor influencing oil price trends.

The data published last week in the United States turned out to be better than forecasts, which reduced concerns about a possible recession in the country's economy. These data reinforced traders' confidence that the Federal Reserve could cut interest rates as early as next month, which in turn could boost fuel demand.

The current price of Brent crude oil is $80.30 per barrel. North American WTI oil is trading near the level of $77.70. Over the past week, Brent has risen by 3.7%, and WTI — by 4.5%, ending the first of five weeks in the «plus».
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JPMorgan: EM shares will benefit from the slowdown in the US economy

JPMorgan forecasts favorable prospects for emerging market (EM) stocks amid an expected slowdown in U.S. economic growth and lower interest rates in the second half of 2024. Analysts believe that these factors will have a positive impact on the comparative performance of EM shares due to differences in growth rates and interest rates.

Experts believe that adjusting expectations regarding rates and growth in the United States will lead to a higher valuation of EM shares in global investment strategies. However, they warn of risks, including economic downturns, market instability and the impact of the upcoming U.S. elections on international trade and investment risks.

The growth gap between EM countries and developed markets (DM) is expected to widen to 2.7% in 2024, compared with 2.5% in 2023. The Fed's rate cut may create opportunities for monetary policy easing in the EM.

Other factors boosting the attractiveness of EM stocks include limited investments in the sector, attractive prices, diversification strategies from U.S. stocks, and a weakening U.S. dollar.

The historically slowing but resilient U.S. economy is favorable for EM stocks. During periods of Fed rate cuts, EM stocks usually perform better: the average decline is 11% for EM, 15% for DM and 13% for the US.
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S&P 500: the forecast for 5600 points remains

Analysts maintained an optimistic outlook for the S&P 500 index, expecting it to rise to 5600 points by the end of the year. The strong result of the second quarter, when the profits of S&P 500 companies increased by 10.5% year-on-year, exceeding the forecast of 8.1%, became the basis for such a positive attitude.

Seven major technology companies contributed significantly to this growth, increasing earnings per share by 38%. It is important to note that the remaining 493 S&P 500 companies also showed positive profit growth, which is the first time in the last six quarters.

Despite the good performance, profit growth forecasts for the second half of the year were slightly adjusted down to 10% y/y. Analysts note the risks to the market, in particular, rising unemployment and the likelihood of a recession.

Nevertheless, they believe that reducing the dependence of the index's income on cyclical sectors may provide some stability. The consensus forecast for earnings per share (EPS) for 2024 coincides with analysts' estimate of $250, which supports the target for the S&P 500 at the end of the year.

Analysts have expressed doubts about the ambitious forecast for profit growth of 15% in 2025, offering a more cautious forecast in the area of high single-digit percentage growth rates. Despite these considerations, analysts remain positive about the market and confirm their year-end S&P 500 target at 5,600.
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Powell's performance was a turning point for gold

The gold market is once again reaching record highs, exceeding the mark of $2,560 per ounce. This upward movement in the market was provoked by a speech by Fed Chairman Jerome Powell in Jackson Hole, where he made it clear that the Fed is ready to lower interest rates.

Lower Treasury bond yields, a weaker dollar and increased investment in exchange-traded funds investing in gold (ETFs) create a favorable environment for gold prices to rise. These factors, which previously inhibited the growth of the value of gold, can now become a powerful incentive for it.

Jay Hatfield, chief executive officer of Infrastructure Capital Advisors, notes that the expectation of interest rate cuts from the Fed was a turning point for gold. He emphasizes that previously everyone believed that the Fed would be the last to cut rates, but now the situation has changed.

This year, gold has shown impressive growth, setting new records and occupying one of the leading positions among the main commodities.
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The dollar is recovering after the fall

On Thursday, the US dollar recovered from its recent fall, rebounding from a 13-month low. The dollar index, which tracks the USD exchange rate against a basket of six other currencies, rose 0.2% to 101.182.

The recovery of the exchange rate is associated with an increase in demand for the dollar as a "safe currency" amid worsening geopolitical problems in the Middle East, as well as concerns about the resumption of trade disputes between China and the West.

However, the dollar is still under pressure due to the expected reduction in US interest rates next month. In August, the dollar fell by about 2.9%, which was the sharpest drop in the last nine months.

Preliminary GDP data showed the resilience of the American economy, fueling hopes for a soft landing. But the latest data also revealed a weakening of the labor market.

Data on the PCE price index, which is the Fed's preferred measure of inflation, will be released on Friday and is likely to affect interest rate forecasts.
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