- A hint to start the week: US equities snapped a 4-week winning streak last week, but don't conclude the end of an era for “a bear market rally” just yet as probabilities are still in favour of a 50-basis points rate hike or a “dovish Fed pivot”, according to the CME Group Fed Fund futures contracts pricing. In fact, either a 75-bps or a 50-bps interest increase might mark a peak hawkishness of the Fed, which could continue to back the market rebounding trend. And on the economic front, a mild recovery from the Fed-dented business and consumer confidence is expected for the second half, given the cooling inflation data released for July.
- Markets performance: Most of the world’s major benchmarks finished lower last week, suggesting the two-month-long market rally is taking a breather ahead of this Friday when Fed Chair Jerome Powell is to speak at the annual Jackson Hole Symposium. Hence, the faded policy optimism may take stock markets into a range movement in this week.
World major indices performances as of 21, August 2022Source: investing.com (Click to see the enlargged picture)
- Highlights for the week: Tesla is to launch 3-for-1 stock split pre-US market open on the 25 August, which will bring the largest EV maker’s share price down to one-third of the current market price. Plus, Nvidia’s Q2 earnings result will give more clues about if the semiconductor industry’s growth has hit a peak.
What we're watching
- Chinese stocks fall: In China, the weak economic data and poor performance of its largest tech company, Tencent, sent jitters through Chinese stocks. The economy’s growth slowdown sparked concerns over demands and production disruptions.
- US dollar regains strength: The US dollar brutally reversed its losses against G10 currencies last week due to a faded hope for the “Fed pivot” and a jump in bond yields.
- Crude oil comeback: Crude prices signaled a bottoming opportunity from their two-month lows. Will this rebound continue?
- Cryptocurrency rebound pauses: Both bitcoin and Ethereum pulled back from key technical resistance levels by positively correlating with US growth stocks.
Economic Calendar (22 August – 26 August)
US – Jackson Hole Symposium, Q2 GDP(Prelim), Core PCE (July)
The Fed Chair, Jerome Powell’s speech at Jackson Hole Symposium will provide a clear picture of the future rate hike path. Despite growing bets of a “Peak Fed” amid cooled inflation data from July, the Fed officials did not signal to slow down the pace on rate hikes. Market participants are pricing for a 50-bps increase in September, 50-bps in November, followed by 25-bps in December to 3.75%, which indicates the pace of the rate hikes may have reached a peak.
The first read of the second quarter GDP printed at -0.9%, following a 1.6% contraction in the first quarter, which defines a technical recession by economists. However, US lawmakers don't see the economy as being in a recession with a strong labor market, despite subdued consumption. The second read of the GDP is forecasted at -0.8%, and the first quarter GDP have been revised up to -1.5%.
The July core PCE, excluding food and energy, rose 0.6% month by month to 4.8% from 4.7% in June, the data reached a peak of 5.3% in March. Meantime, the PCE data hit a record high of 6.8% in July. The core PCE is expected to be at 4.7%.
Global flash manufacturing & Service PMIs (August)
The major world economic flash PMIs for August are economic indicators that help gauge economic activities of respective regions. While most of the EU countries are expected to report contractions in data, both UK and US figures might be relatively positive, though slowdowns could not be avoided. Especially, the US service PMI is forecasted at 50.0 for August after a sharp contraction of -47.3 the prior month.
Japan – Tokyo Core CPI (July)
The Japanese national core CPI printed at 2.4% last week, which is the fourth straight month read of above 2% since April. The Japan Tokyo Core CPI for July is expected to improve to 2.5% from 2.3% in June, which will be the third consecutive monthly rise in data. However, the BOJ may not change the dovish tone of its monetary policy any time soon due to sluggish economic growth.
New Zealand – Q2 retail sales
New Zealand’s retail sales data widely swung since the final quarter of 2021 due to Coivd-induced health restrictions. The data is expected to return growth of 1.7% in the second quarter from a 0.5% contraction in the first quarter. Recent full-year performance reports on local companies indicate businesses expect improved conditions in the second half of the year, though the New Zealand housing price had the first annual drop in August in 11 years due to aggressive rate hikes by the RBNZ.