French bonds underperformed in Europe after Fitch Ratings cut the nation’s rating in the wake of political turmoil. The pound led major currencies higher against the dollar. Treasuries were little changed, with the 10-year yield at 4.06%.
The key question this week is whether the Fed will push back against market wagers on a string of cuts extending into next year when officials gather on Wednesday. Traders are almost fully pricing reductions at each of the next three meetings, betting the Fed will lean toward supporting a softening job market even as inflation remains above target.
The Nvidia announcement landed as US and Chinese officials entered a second day of trade talks in Madrid. Still, some traders view Monday’s mild risk-off reaction as just a blip on the path for stocks to extend their rallies.
“At this moment of the cycle, bad news just doesn’t stick,” said David Kruk, head of trading at La Financiere de l’Echiquier. “We’re about to enter a cycle of rate cuts with strong EPS growth, that’s a really great cocktail.”
The Fed won’t be the only major central bank in focus. Policy decisions from the Bank of Canada on Wednesday, the Bank of England on Thursday, and the Bank of Japan at week’s end will round out a packed calendar for half of the world’s 10 most-traded currencies.