European markets experienced an increase in major indices, although Germany’s DAX was slower to rise. The European Central Bank (ECB) kept interest rates steady, indicating that inflation might be easing more than expected. As a result, the likelihood of quick rate cuts from the ECB has declined, with only a 50% chance of a cut by mid-2026. The ECB’s deposit facility rate remains at 2.00%, awaiting stronger evidence of falling inflation. Inflation forecasts are consistent with earlier predictions, although some core metrics exceed targets. This situation encourages the ECB to remain cautious, making immediate rate cuts less likely. Despite a firmer stance, market indices did well, with Italy’s FTSE MIB showing the most gains. The German DAX rose by 0.30%, France’s CAC increased by 0.80%, and the UK’s FTSE 100 advanced by 0.78%.

US Market Performance

In the United States, stocks rose significantly, with the Dow up by 570.81 points, the S&P increasing by 53 points, and the NASDAQ growing by 150 points. US bond yields fell, bolstering the market, alongside strong interest in recent Treasury auctions. In other market updates, crude oil was priced at $62.45, gold at $3639, and silver peaked at $41.70. The US dollar weakened against major currencies, dropping 0.74% against the AUD. The ECB suggests that rates will remain higher for longer, declaring that the “disinflationary process is over.” Supporting this view, new data shows August 2025 core inflation in the Eurozone at 2.8%, still above the 2% target. With markets pricing only a 50% chance of a rate cut by mid-2026, we should be careful about long-term optimism on European stocks, particularly the interest-sensitive German DAX. Meanwhile, U.S. bond yields are declining, which is helping to push American stocks to record highs. This rise is fueled by expectations of a softer inflation report next week after the August jobs report indicated wage growth slowing to 3.1%. The widening gap between a hawkish ECB and a potentially pausing Fed will be a key theme in trading over the next few weeks. With U.S. markets gaining momentum, consider buying call options or creating call spreads on the S&P 500 and NASDAQ 100 to benefit from this trend while managing risk. The mixed signals from central banks could increase market volatility. Hence, it might be wise to seek protection or speculate on price fluctuations using options on the VIX index, which remains low despite existing uncertainty.

Silver Market Trends

Keep a close watch on silver, which has just reached a high not seen since September 2011. This is more than just a technical shift; it’s driven by a fundamental supply shortage from record industrial demand in the solar and electric vehicle sectors for 2025. Using options on silver ETFs offers an efficient way to gain exposure to this potential rally. The U.S. dollar is generally declining, and this trend may continue as U.S. yields fall. The Australian dollar is particularly strong, making long AUD/USD positions appealing through futures or options. This situation reminds us of the 2014-2015 period, when differing policies from the Fed and ECB influenced currency movements for months, indicating that this pattern may extend beyond a single day. Create your live VT Markets account and start trading now.

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