- US equities ended a three-day rally as investors digested Fed officials' hawkish comments and data showing slower growth in the manufacturing sector.
- The S&P 500 dropped on Monday after having its best month since 2020. After rising as much as 1.1%, the tech-heavy Nasdaq 100 was little changed. Throughout the session, both indexes struggled to find direction. Treasuries in the United States rallied, with the 10-year yield falling to around 2.58%, the lowest since April.
- After hinting at a possible pivot last week, Fed officials indicated that the central bank will need to raise rates further to control inflation. The latest data point to show that aggressive Fed tightening is starting to slow economic growth is the purchasing managers index for manufacturing.
- Stocks soared in July on speculation that the Fed was nearing the end of its rate-hiking cycle, owing to signs that runaway inflation had peaked. Investors are now scrutinising data, where any reading above expectations could derail bets on a Fed pivot. At the same time, corporate earnings have largely demonstrated that companies can deliver profit growth.
- Geopolitical tensions also kept markets on edge, with China again threatening to use its military force if House Speaker Nancy Pelosi makes a historic visit to Taiwan. Following the report, the offshore renminbi fell as much as 0.6% on the day, while non-deliverable forwards on the Taiwanese dollar indicated a weakening of the island's currency.
