Trading got underway across European markets on Monday, with a cautiously optimistic tone prevailing. US index futures also pointed to a firmer start on Wall Street, as investors positioned themselves ahead of a data-heavy session that could influence the Federal Reserve's next policy move.
Key Data Releases on the Horizon
The focus will sharpen at 14:30 CEST, when two important economic indicators are released simultaneously: Canada's July consumer price index (CPI) and the New York Fed's Empire State manufacturing survey. These reports come just one hour before the US market opens, and their results could have an outsized impact on currencies, bond yields, and rate expectations.
Markets currently assign only a 30% probability to a Fed rate hike in September. Any surprise in the Empire State data or Canadian inflation could quickly alter that calculus, potentially triggering a repricing across asset classes. Equities and gold have already benefited from the recent dovish shift in expectations, while the US dollar has come under pressure.
Empire State Manufacturing
The Empire State index, which measures manufacturing activity in New York state, came in at 15.6 in July, indicating continued expansion. Investors will be looking for signs that regional factory growth is holding up. A strong reading could reinforce the case for tighter monetary policy, while a weak number might bolster the case for a pause.
Canadian Inflation
Statistics Canada reported that inflation stood at 2.8% year-over-year in June. The July reading will be closely watched for any surprises. A higher-than-expected print could boost the Canadian dollar and lead to increased expectations for Bank of Canada rate hikes. Conversely, a softer figure might ease those concerns.
Homebuilder Sentiment and Labor Market Data
At 16:00 CEST, the National Association of Home Builders (NAHB) releases its housing market index. The index dropped to 34 in July, well below the neutral 50 level, reflecting the impact of elevated mortgage rates. This is seen as a key gauge of US rate sensitivity, and the August figure will be scrutinized for any further deterioration.
Later, at 17:00 CEST, the New York Fed will release its Survey of Consumer Expectations Labor Market Survey, providing insights into household job perspectives. While this is a secondary report, it can offer useful context on the health of the labor market.
Earnings in Focus: Fabrinet and BHP
After the US market close, Fabrinet (NYSE: FN) will report its fiscal fourth-quarter and full-year 2026 earnings. The company, which specializes in optical networking and serves the AI supply chain, previously posted a 39% increase in quarterly revenue to $1.214 billion. It has guided for fourth-quarter revenue in the range of $1.25 billion to $1.29 billion, and investors will be keen to see if the company can meet or exceed these expectations.
BHP (NYSE: BHP) is scheduled to release its full-year results on Tuesday morning in Melbourne, which corresponds to approximately 00:30 CEST. The mining giant's results will be closely watched for insights into iron ore and copper market dynamics, as well as overall global demand for commodities. Recent fluctuations in these markets have made the report particularly significant.
Market Outlook and Analyst Views
Goldman Sachs (NYSE: GS) has raised its STOXX 600 target to 695 from 660, implying roughly 5.5% upside from current levels. The bank's analysts see European equities as relatively resilient despite global uncertainties. Andrea Cicione, head of research at TS Lombard, noted that US data is weakening while European data remains comparatively robust.
Bank of America (NYSE: BAC) has adopted a more hawkish stance on Japan, projecting four rate hikes by July 2027, which would bring the policy rate to 2%. This divergence from the Fed's expected path has helped bolster the yen and weigh on the dollar.
Risks and Considerations
Monday's calendar is relatively light, which could amplify market reactions to any unexpected data. Thin summer trading volumes may also exacerbate volatility. Additionally, oil prices remain a key risk factor. A fresh supply shock could push inflation expectations higher, undoing some of the recent decline in Fed rate hike bets.
Investors should remain vigilant as the session progresses, with the data releases at 14:30 CEST likely to set the tone for the US trading day.
