Market Expectations Firm for Fed Hike, ECB Warns on Middle East Tensions

Markets are currently pricing in approximately a 35% probability of a Federal Reserve interest rate hike at its meeting this week, driven by stronger-than-expected July PMI data and resilient labor market indicators. European Central Bank (ECB) official Zigman cautioned that renewed tensions in the Middle East would take time to impact economic data, reinforcing expectations for a September rate hike. European equities generally advanced, while US technology stocks, particularly those linked to AI, faced pressure following Alphabet's capital expenditure-heavy earnings report, leading to a decline in the Nasdaq. The S&P 500 remained largely unchanged as gains in defensive sectors offset tech weakness. The euro traded mostly flat against its major counterparts in foreign exchange markets.