21 Aug 2025
Global markets show mixed sentiment amid Powell speech
Global markets displayed a mixed sentiment on Thursday, with the US dollar slightly retreating from its recent high. This cautious optimism stemmed from anticipation surrounding the Federal Reserve's annual Jackson Hole symposium, a three-day event attracting central bankers worldwide.
The primary focus, however, rested on Federal Reserve Chair Jerome Powell's speech scheduled for Friday. Investors eagerly awaited clues regarding the likelihood of a September interest rate cut, a decision that could significantly impact global financial markets.
The Japanese Nikkei index experienced a 0.6% decline in the morning session, marking a retreat from its record high achieved on Tuesday. This downturn occurred despite a mixed performance by Japanese chip stocks following a tech-led selloff in the US overnight. While Advantest saw a 3% increase, Tokyo Electron suffered a 2% drop, highlighting the sector's volatility.
South Korea's KOSPI index, however, rebounded with a 0.9% gain, recovering from a six-week low reached the previous day. Australia's benchmark index also performed strongly, rising 0.6% and reaching a new all-time high, potentially reflecting confidence in the nation's economic resilience. Mainland China's blue-chip stocks showed a modest 0.5% increase, while Hong Kong's Hang Seng index remained relatively flat, indicating a divergence in regional market sentiment.
US stock futures pointed towards a lower opening, with Nasdaq futures down 0.2% and S&P 500 futures slightly easing by 0.1%. This followed overnight declines in the Nasdaq Composite (0.7%) and the S&P 500 cash index (0.2%).
The prevailing market sentiment, as articulated by Kyle Rodda, an analyst at Capital.com, indicated a bearish skew for equities. He highlighted the growing risk of disappointment stemming from Jackson Hole, specifically concerning the potential for a less aggressive, or even absent, dovish pivot from the Fed.
Market pricing currently reflects an approximately 80% probability of a quarter-point rate cut on September 17th, with a total of 52 basis points of easing anticipated for the remainder of the year. This represents a slight decrease from Wednesday's 84% probability for a September cut.
The Fed's reluctance to cut rates, as previously expressed by Chair Powell, is partly attributed to anticipated tariff-driven inflationary pressures during the summer months.
The minutes from the Fed's July meeting, where policymakers opted to maintain rates, revealed dissenting voices. Fed Vice Chair for Supervision Michelle Bowman and Governor Christopher Waller, for instance, voiced concerns about the persistence of inflation and advocated for a more cautious approach to monetary policy.
Their reservations suggest a potential internal debate within the Federal Reserve regarding the appropriate response to current economic conditions. This internal disagreement adds to the uncertainty surrounding Powell's upcoming speech.
Furthermore, geopolitical factors add another layer of complexity. The ongoing conflict in Ukraine continues to disrupt global supply chains and fuel inflationary pressures, adding another obstacle for the Fed to navigate.
Energy prices, influenced by geopolitical tensions and global demand, remain a key variable impacting inflation expectations. The strength of the US dollar also plays a significant role, affecting global trade and potentially impacting inflation through imported goods. The dollar's strength could also lead to a further tightening of global monetary conditions.
In addition to these macro-economic factors, the tech sector's performance remains a crucial indicator of market health. The recent sell-off in US tech stocks, coupled with the mixed performance of Japanese chipmakers, suggests continued uncertainty in this crucial sector.
Investor sentiment towards technology companies hinges on various factors, including growth prospects, regulatory scrutiny, and overall economic conditions. Any significant shift in this sector could have ripple effects across global markets.
Therefore, the Jackson Hole symposium holds significant weight, not only for the US but also for the global economy. Powell's speech will be meticulously scrutinized for any subtle shifts in the Fed's outlook on inflation and the appropriate monetary policy response.
Any deviation from market expectations could trigger significant volatility in financial markets worldwide, affecting everything from currency exchange rates to the pricing of assets across different sectors. The coming days will be crucial in determining the direction of global markets in the near term.
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