Global Influences on Markets: Ajay Bagga Discusses China, Metals, and Future Trends

economictimes.indiatimes.com:

China issue. The massive scale of China's problems will necessitate a fiscal impulse, as the monetary path has limitations,” says market expert Ajay Bagga. Edited excerpts:
ET Now: This week is crucial with the Jackson Hole meeting and Fed Chair's comments. What key takeaways are you looking for, and which subjects have caught your attention?
Ajay Bagga: Last time, the Fed Chair's speech was very hawkish, using the term «economic pain» repeatedly.

The markets plummeted after Powell's last year's Jackson Hole speech. This time, the US economy is strong, though inflation remains significant. It has decreased from 8.5% in July to 3.2% this July, yet it's persistently high.

Fed officials' speeches vary; some suggest more rate hikes, while others advocate waiting. However, none are discussing rate cuts. The US yield curve shows the trend toward next year's rate cuts, with the two-year above 5% and the 10-year at about 4.24%.

Labor markets are tight, unemployment is low, and economic growth is high. The Atlanta Fed GDP now number stands at 5.9% for this quarter. The US economy is doing well.

Two factors will shape market trends: China's situation, a major issue, and Powell's stance.
ET Now: The puzzling aspect is the US tenure at 4.25%. Previously, when it exceeded 4%, global and Indian markets crashed. Why is it different now, considering lower inflation and better commentary? Are we at the rate hike cycle's peak?
Ajay Bagga: A pertinent question.

We're near the peak of the rate hike cycle. However, central banks, having been wrong before, are hesitant to declare victory. Flash PMI numbers for August weren't positive for the Eurozone, the UK, or the US manufacturing.