Macro Wrap

The main theme overnight was risk-on. Market expectations for Fed rate cuts gained momentum after US Treasury Secretary Scott Bessent’s remarks on Fed rate cuts. The DJIA, the S&P500, and the Nasdaq Composite Index rose 1%, 0.3%, and 0.1% respectively. The Euro Stoxx 50 rose 1%. The Dollar Index fell 0.3% to 97.84. EUR-USD rose 30 pips to 1.1710. The US 2Y yield fell 6bp to 3.67% and the 10Y yield also dropped 6bp to 4.23%. Brent crude oil prices fell 0.7% to USD65.63. Gold rose 0.2% to USD3,356.

US Treasury Secretary Scott Bessent said the Fed Fund Rate ought to be 1.50-1.75% lower than currently, and that a 50bps rate cut in September is warranted. This comes ahead of next week’s Jackson Hole symposium, with speculation that Fed chair Jerome Powell may finally strike a more dovish tone, following the earlier week NFP report. Sentimentally negative for USD.

Chinese financial institutions recorded a decrease of CNY49.9 bn of new domestic currency loans in Jul (Bloomberg est: +CNY0.3 tn, Jun: +CNY2.24 tn), the first contraction in two decades as Medium- and long-term loans to both households and corporates contracted in Jul,Which pushed officials to announce loan interest subsidies for personal and service sector loans to enhance consumption, a crucial economic driver. This initiative aims to stimulate spending and promote economic growth. Sentimentally positive for broader market.

The International Energy Agency (IEA) again trimmed its 2025 demand-growth forecast to 0.7mbpd, down by 20,000 bpd from Jul and by 350,000 bpd since the start of the year, on weaker than expected demand from developing economies. Weakening demand is being met by rising supply as the IEA increased its supply-growth forecast for this year by 370,000 bpd to 2.5mbpd as OPEC+ readies to return the last 548,000 bpd tranche of 2.2mbpd of production cuts in Sep. Global crude oil prices have declined around 10% in August, amid rising supplies from OPEC+, along with weaker demand from emerging markets. Sentimentally positive for OMC’s, Paint stocks and India rupee.