Global Economy 'Muddling Through,' Peel Hunt's Kallum Pickering Says

Jobs reports, a key inflation reading and the Federal Reserve's interest rate decision all hit over the next 14 trading sessions, setting the tone for investors as they return from summer vacations. The events arrive with the stock market seemingly at a crossroads after the S&P 500 Index posted its smallest monthly gain since July 2024 and heads into September, historically its worst month of the year. Peel Hunt Chief Economist Kallum Pickering joins Caroline Hepker to discuss.

Wall Street returned from a long weekend to renewed anxiety over frothy technology stocks and stretched government budgets. Global bonds staged a broad retreat and gold briefly touched an all-time high.

Nasdaq 100 futures dropped 1.3%, deepening the tech-driven selloff that closed out last week. Nvidia Corp. led premarket losses among the Magnificent Seven, retreating 2.4%. S&P 500 contracts fell 1%. The dollar posted its biggest gain since July, putting it on course for a first advance in six days.

The yield on 30-year Treasuries climbed six basis points to 4.99%, while their UK counterparts hit the highest since 1998. Britain’s need to fund a widening budget gap came into focus amid a 10-year debt sale that raised a record £14 billion. The pound fell more than 1.3%.

This year’s record-breaking stock rally enters a decisive stretch, with markets about to see whether bets on the first Federal Reserve rate cut of 2025 will play out this month and whether expectations for further easing remain intact. Adding to the pressure are tariff tensions and concerns that President Donald Trump’s attacks on the Fed could stoke inflation.

“I think the long end of the curve should continue to rise because we have big fiscal deficits that need to be funded,” David Zahn, head of European fixed income at Franklin Templeton, told Bloomberg TV. “And how is that going to be done? It will have to be termed out.”

A raft of data is due this week, starting with the Institute for Supply Management’s August surveys of manufacturers and service providers on Tuesday.

Friday’s nonfarm payrolls report is expected to show a fourth straight month of sub-100,000 job growth, the weakest stretch since the onset of the pandemic in 2020.

Swaps currently imply a 90% chance of a quarter-point Fed rate cut later this month, with three more similar moves expected by June.

“There’s a lot of caution around moving closer to key US inflation and labor market data,” said Andrea Tueni, head of sales trading at Saxo Banque France. “That warrants some prudence moving forward.”

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