A look at the day ahead in European and global markets from

Wayne Cole

It's been a blessedly quiet start to the week in Asia with

Japan taking a much-needed holiday for Mountain Day, after the

Nikkei tumbled down a mountain of its own last week and sent

global markets reeling.

If Tokyo were open, futures suggest the Nikkei would be

trading 400 or so points higher but still not back to where it

was before last Monday's record plunge.

Most other Asian stock markets are firmer, led by a 2% jump

in Taiwan, while Wall Street futures are flat.

The dollar was dithering around 147.00 yen, with the

unravelling of the yen carry trade seemingly over for now. IMM

data out last week showed net short USDJPY positions now at

11,354, down from 184,000 in early July.

Treasury futures are also little changed while Fed fund

futures imply a 49% chance of a half-point rate cut in

September, after touching 100% at one point a week ago.

Fed officials have effectively pushed back on chatter of an

inter-meeting cut, with Fed Governor Michelle Bowman noting on

the weekend that inflation was still uncomfortably above target.

She did soften her typically hawkish tone enough to concede that

rates will need to fall gradually if inflation continues to

slow.

Markets will know more about that when U.S consumer price

data is released on Wednesday, with forecasts tipping annual

core inflation to fall a tick to 3.2%, the lowest since April

2021. An even lower number would have pundits again warning the

Fed was behind the curve on cutting.

Note: July retail sales on Thursday could surprise on the

high side given the median forecast is +0.3% but the range is

0.0% to +0.9%. Results from Walmart and Home Depot this week

will offer more colour on the state of demand. Weekly jobless

claims could also move markets more than usual given the

unexpectedly sharp fall reported last week.

In geopolitics, the Middle East remains a tinder box with

Israeli Defense Minister Yoav Gallant telling U.S. Defense

Secretary Lloyd Austin that Iran was getting ready for a

large-scale attack on Israel.

The Pentagon made the rare decision to publicly report that

Austin had ordered the deployment of a nuclear-powered guided

missile submarine to the Middle East. The Pentagon added that

Austin had also ordered the Abraham Lincoln strike group to

accelerate its deployment to the region.

Key developments that could influence markets on Monday:

- German Economy Minister Robert Habeck, RWE Chief

Executive Markus Krebber speak