Traders remain cautious amid market uncertainty.

Traders remain cautious amid market uncertainty

Investor mood leaned towards caution last week, as seen in the downturns of major stock indices. In Europe, the Euro Stoxx 50 declined by more than 2% over the week. By the end of trading on Wall Street on Friday, the S&P 500 had decreased by 2.1% from its starting point.

The cautious stance was set against the context of a prolonged expectation for higher interest rates, coupled with a steady rise in bond yields. The 10-year US Treasury yield neared its 15-year peak, surpassing 4.3%. The 10-year UK Gilt yield climbed past 4.7%, a figure last observed in 2008. In contrast, Eurozone yield shifts were less dramatic. Concerns about the future of the world's second-largest economy grew due to disappointing economic data from China.

In terms of currencies, the euro faced challenges vs the pound and dollar. The relative changes in their respective rates/yields were not in the euro's favour last week. This was evident as EUR/USD dipped below the $1.09 mark and EUR/GBP couldn't maintain above 86p. Conversely, the pound saw minor gains against the dollar, slightly surpassing $1.27.

For the upcoming week, the spotlight will be on the preliminary PMIs for August from the US, Eurozone, and UK. So far this year, there's been a noticeable split in the performance of the manufacturing (shrinking) and services (growing) sectors. This trend is anticipated to persist. On the policy side, the ECB will share details of their July meeting. The yearly Jackson Hole Economic Symposium in the US is also on the radar, but Federal Reserve representatives might not offer clear insights into the US rate projections, as the institution is now primarily guided by current data.