Stagflation concerns are rippling through global markets after US jobless claims climbed to 226,000 last week, exceeding forecasts, while continuing claims surged to 1.97 million — their highest level since November 2021. Combined with persistent inflationary pressures, the data has heightened fears that the US economy may be entering a period of slowing growth coupled with elevated prices. Traders now place an 88% probability on a 25-basis-point Federal Reserve rate cut at the September meeting, according to Prime Market Terminal. Fed official Musalem signaled a cautious stance, citing “risks on both sides of our mandate” amid tariffs and weakening job growth. Master the markets with expert trading courses from MJFXm—your gateway to financial success.
The US Dollar Index ticked up 0.10% to 98.14, while Wall Street’s rally faces a fresh challenge from Tuesday’s CPI release. The S&P 500 and Nasdaq sit near record highs, but strategists at Deutsche Bank and Morgan Stanley warn of a potential pullback as stretched valuations and seasonal volatility converge. The S&P 500 now trades above 22x forward earnings — well beyond its 15.8 long-term average — after a 28% rebound since April’s lows.
In Europe, the ECB is expected to hold rates steady in September, with just a 12% chance of a cut. Meanwhile, Germany’s ambitious €500 billion infrastructure and defense spending plan — worth 11.6% of GDP over 12 years — faces execution risks. UBS analysts doubt the government can ramp up spending as quickly as projected, citing past underspending and tight implementation timelines.
In commodities, oil prices extended last week’s steep losses in Asian trading, pressured by soft Chinese inflation data and tepid July economic indicators. Market sentiment was also influenced by upcoming US-Russia talks, which could cool tensions in the Ukraine conflict, raising questions over future demand dynamics.