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European and U.S. futures markets saw modest increases on Monday, while Japan's yen weakened as a holiday in Japan eased recent volatility.
After a decline last week triggered by weak U.S. jobs data and adjustments in yen trading strategies, markets have stabilized with European indices showing slight gains.
Market participants are anticipating U.S. economic data this week, including the consumer price index and retail sales figures, with expectations for gradual inflation changes.
European stocks and U.S. futures experienced modest rises on Monday, while the yen weakened, following a Japanese holiday that alleviated some recent market turbulence. This comes after last week's significant downturn, driven largely by a drop in Japanese stocks and disappointing U.S. employment figures, coupled with adjustments in yen trading strategies, which also affected financial stocks.
Despite last week's market challenges, including a notable decline in Japanese stocks and concerns over global economic growth, recent stronger-than-expected U.S. economic data has helped restore market confidence. By Friday, stocks had recovered nearly all their losses.
On Monday, Europe's STOXX 600 index gained 0.2%, following a 0.3% increase the previous week. Germany's DAX index rose by 0.3%, and the UK's FTSE 100 climbed 0.5%. Meanwhile, U.S. S&P 500 futures edged up 0.2%, recovering from a previous 3% drop.
Attention is now focused on upcoming U.S. economic reports. On Wednesday, the consumer price index for July is expected to show a slight increase in monthly inflation to 0.2%, up from June's -0.1%. Retail sales data is scheduled for release on Thursday.
Timothy Graf, a senior macro strategist at State Street, noted, "Inflation is not as pressing a concern as it was before." He added that there might be more effects from previously tight policy showing up in the labor market.
The yen's value dropped with the dollar rising by 0.65% to 147.57 yen. The dollar index remained relatively stable at 103.22, with minimal movement in the euro and pound.
The yen's recent volatility has been influenced by a significant rally in July and August, prompting investors to unwind carry trades, where they borrow yen to invest in higher-yielding assets. Recent data indicated that leveraged funds, including hedge funds, have been reducing their yen positions at the fastest pace since March 2011.
Lee Hardman, a currency strategist at MUFG, commented on the current market situation, saying, "This week has started much more quietly compared to last week. The reduction in short yen positions by leveraged funds likely offers reassurance that the unwinding of yen-funded carry trades is nearing completion."
