Markets rebound on growing rate cut bets

General market commentary

Global markets rallied last week after Fed Chair Jerome Powell signalled at Jackson Hole that policymakers are prepared to cut rates as early as September, should incoming data justify a shift. His acknowledgement of softer labour-market conditions reinforced market expectations for easing, sending bond yields and the dollar lower while driving equities higher, particularly across rate-sensitive and cyclical sectors. Small-cap shares, financials, and consumer discretionary names outperformed, while retail earnings underscored a surprisingly resilient consumer backdrop despite ongoing tariff pressures. Markets now price in a high probability of two Fed rate cuts this year, in September and December, which would mark a clear pivot towards a more supportive policy stance.

Attention now turns to this week’s data and earnings releases, with US PCE inflation and consumer spending figures due alongside NVIDIA’s closely watched results. AI remains a key market driver, though stretched valuations in the tech sector have contributed to recent volatility, with investors scrutinising profitability more carefully. With the S&P 500 up around 30% since April’s lows, a near-term pullback is possible, particularly as seasonal headwinds in September and October combine with lingering inflation uncertainty. However, the broader backdrop remains constructive, and any bouts of volatility may provide opportunities for investors to adjust their exposure in line with market conditions.

Latest market and economic update

Asian equities mostly advanced on Monday, tracking Wall Street gains amid rising bets on a September Fed rate cut. Chinese and Hong Kong shares led, driven by strong rallies in technology and chipmakers. Japan, South Korea and Singapore also posted gains, while Australia lagged, though the ASX 200 remained close to recent record highs.

US equity futures were steady overnight as investors awaited a packed earnings week, with Nvidia and CrowdStrike due Wednesday, followed by Dell and Marvell Thursday. Focus also turns to Friday’s PCE inflation data. This comes after Wall Street’s Friday rally, fuelled by Powell’s signals of a possible September rate cut.

European equities ended higher on Friday, buoyed by optimism over the EU-US trade deal and expectations of a September Fed rate cut. The CAC 40 and DAX were flat, while Italy’s FTSE MIB gained 0.7% and Spain’s IBEX 35 held steady. Autos, mining and travel led sector gains, with pharma and biotech also advancing.

The US dollar index edged toward 98 on Monday, partially recovering last week’s drop after Jerome Powell signalled rate cuts may be nearing. Traders priced in an 87% chance of a September cut, lifting the dollar. The euro slipped to $1.1703, with markets awaiting Friday’s PCE inflation data for further policy guidance.

Oil prices held steady in Asian trading this morning after strong weekly gains, with Brent at $67.77 and WTI at $63.72 per barrel. Optimism over a Russia-Ukraine ceasefire has faded, supporting prices despite surplus concerns. Additional support came from Powell’s dovish remarks, which boosted expectations of a September Fed rate cut and stronger energy demand.

Fed Chair Jerome Powell signalled at Jackson Hole that the central bank may cut rates in September due to rising downside risks in the labour market, boosting equities and gold while pushing down yields and the dollar. Markets now price an 88% chance of a September cut, with analysts noting Powell’s remarks were dovish yet cautious amid Trump’s pressure.

US Vice President JD Vance said Russia has made “significant concessions” in talks over the Ukraine war, including abandoning demands for a puppet regime in Kyiv and accepting security guarantees. He noted progress despite no ceasefire, while President Trump warned of new sanctions if peace efforts stall, stressing economic pressure remains key to negotiations.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

Coca-Cola is working with Lazard to review options for its Costa Coffee chain, including a possible sale, sources told Reuters. Initial talks with potential bidders have begun, with indicative offers expected in autumn. Coca-Cola, which bought Costa for $5bn in 2018, has admitted the investment has underperformed and is reassessing its coffee strategy.

Apple is in talks with Google to use its Gemini AI for a major Siri revamp, while also exploring options with Anthropic and OpenAI. Meanwhile, Google secured a six-year, $10bn cloud deal with Meta to support large-scale AI infrastructure. The move highlights intensifying competition as big tech accelerates generative AI investment and adoption.

DHL and Deutsche Post will suspend standard business parcel shipments to the U.S. from August 25, following similar moves by European peers, due to new U.S. customs rules ending the "de minimis" exemption for packages under $800. Premium DHL Express services remain unaffected, while private shipments under $100 can continue under stricter controls.

President Trump announced the U.S. will take a 9.9% stake in Intel for $8.9bn, converting government grants into equity to support the struggling chipmaker. The deal secures $10bn for U.S. factory projects but raises concerns over state intervention in corporate affairs. Analysts warn Intel’s foundry and competitiveness issues extend beyond financial backing.

Spotify will raise subscription prices as it invests in new features and aims for 1 billion users, Co-President Alex Norstrom told the FT. From September, its premium plan will rise to €11.99 in multiple regions. The company, which posted its first annual profit last year, said price adjustments are key to boosting margins.

Chinese property developer Country Garden warned of a larger first-half 2025 loss of 18.5–21.5 billion yuan, as housing deliveries halved and asset impairments rose. The firm, still grappling with debt after a $11bn offshore default, cited low gross margins and a slowing property market. First-half results are due August 29.

Wolfe Research upgraded Roblox to Outperform with a $150 target, citing new advertising and regional pricing revenue streams. Raised 2026 bookings and EBITDA estimates highlight platform improvements and AI-driven content. Trading below peers, Roblox shows strong long-term growth potential and user expansion opportunities.

Barclays upgraded Ulta Beauty to Overweight, citing stronger fundamentals and a positive outlook under CEO Kecia Steelman. Key drivers include margin expansion, improved promotions, a streamlined retail strategy, and limited tariff exposure. Analysts see potential for earnings upgrades, noting Ulta’s broad product range and role as a key distribution channel for beauty brands.

Deutsche Bank upgraded the European pharmaceuticals sector to Overweight, citing tariff relief under a new EU-U.S. trade framework. The agreement caps duties at 15% and eases uncertainty for drugmakers, boosting sentiment. Analysts highlighted attractive valuations, expected 7% earnings growth in 2025, and noted prior earnings cuts have largely accounted for tariff risks.

Upcoming data and events

Today, focus turns to U.S. housing data, with building permits and new home sales set to offer a snapshot of sector strength and its wider economic influence. In Europe, Germany’s Ifo business climate surveys are also due, providing a key gauge of sentiment in the region’s largest economy amid lingering growth concerns.

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