Investing.com - Here are the top five things you need to know in financial markets on Thursday, August 1:
1. U.S. dollar hits 2-year high in Powell aftermath
The U.S. dollar climbed to levels not seen since May 2017 against developed market peers on Thursday after Federal Reserve Chairman Jerome Powell ruled out an extended policy easing cycle.
Although the Fed met expectations for a 25 basis point cut, Powell called the move a “mid-cycle adjustment” and said “it’s not the beginning of a long series of cuts.”
Although markets still bank on an additional cut as early as September, fed funds futures are no longer assuming there will be a third cut this year. That has sent the greenback higher against other currencies.
2. Global stocks mixed in Fed hangover
After the Dow fell by more than 300 points on Wednesday, its largest decline since May, risk-off sentiment spread to global equities, sending Asian shares to six-week lows, although Japan’s Nikkei 225 found support as the yen fell to a two-year low against the dollar.
European shares however seemed to shake off the disappointment nearing mid-day trading thanks in part to positive earnings from the financial sector. Barclays (LON:BARC), Standard Chartered (LON:STAN) or Societe Generale (PA:SOGN) all registered solid gains after results.
U.S. futures struggled to recover, registering a slight bounce as earnings season continued to influence trade. Shares of Fitbit (NYSE:FIT) and Qualcomm (NASDAQ:QCOM) sank in premarket trade after the companies issued disappointing guidance.
Verizon (NYSE:VZ), General Motors (NYSE:GM) and DuPont (NYSE:DD) will release earnings ahead of open, while Pinterest (NYSE:PINS) and Western Union (NYSE:WU) are among companies reporting after the market close.
3. Global manufacturing on watch ahead of U.S. ISM
With little progress made this week in high-level trade negotiations between Washington and Beijing, traders will receive the latest data on U.S. manufacturing activity in July from the Institute of Supply Management at 10:00 AM ET (14:00 GMT).
Despite trade conflicts damaging business confidence, U.S. manufacturing has continued to expand and a slight improvement is projected for Thursday’s reading.
Manufacturing activity in the euro zone contracted for a sixth straight month, with confidence at its lowest level since Dec. 2012, while the U.K. contracted for a third straight month as output declined at the fastest rate in seven years. Both readings were above (even more pessimistic) expectations, however.
4. Oil breaks rally as Fed disappoints
U.S. crude broke a five-day rally as the Fed disappointed by not guiding for a more aggressive series of interest rate cuts.
The Fed lack's of urgency boosted the U.S. currency to the detriment of dollar-denominated crude and other commodities.
Black gold’s recent rally had been strongly supported by expectations that a more dovish Fed would do more to underpin global energy demand.
5. BoE expected to hold amid Brexit uncertainty
The Bank of England is expected to keep rates on hold in a unanimous decision at its meeting at 7:00 AM ET (11:00 GMT), as policymakers wait for the fog of the U.K.’s departure from the European Union to clear.
Markets await the BoE’s assessment of the British economy's current downturn, and how it might respond in the event of a hard Brexit under new Prime Minister Boris Johnson.
Sterling hit its lowest level against the dollar since Jan. 2017 overnight, largely on fears of a no-deal Brexit. Johnson has maintained his hardline stance with Brussels, calling for the withdrawal deal to be rewritten and vowing to take the U.K. out of the EU on Oct. 31 regardless.
-- Reuters contributed to this report.