Both the Fed Powell and ECB Lagarde indicated a “higher for longer rate” approach to continue taming inflation at the Jackson Hole Symposium. Despite a rebound in both US and European markets on Friday, Wall Street is still in the red on a month-to-date performance, pointing to a negative close for the month. Volatilities are expected to be ahead as the US bond yields hold at decade-high levels, which may continue to send jitters to stock markets.
On the earnings front, Nvidia wrapped up the US major tech earnings season with stellar earnings results. However, the tech rally was short-lived as risk-off continued to shape the market trends. This week, the US job data will be closely watched as consensus calls for a further decline in the employment data, which could cap wage growth, in turn easing inflationary pressure. The second read of the US Q2 GDP can also be critical for markets to assess the country’s economic health.
Notably, the Chinese stock markets eased selloff amid a slew of positive companies’ earnings, suggesting the country may still be on track for an economic rebound despite a bumpy journey. However, investors are not convinced just yet as Beijing’s efforts are seen as not enough to boost the economy. Hence, China’s manufacturing and services PMIs will be the economic bellwether this week for clues of the country’s economic recovery. And the local EV maker, NIO’s second-quarter earnings report, can be a near-term price mover for the sector.
The ASX was under pressure as a decline in industrial metal prices darkened big miners’ growth outlooks. At the sector level, a plunge in Ramsay’s stocks dragged on the healthcare stocks after the company cut the dividend in half due to macro headwinds. Whitehaven Coal’s shares tumbled after the miner suspended the share buybacks to preserve cash for BHP’s coking coal mines. And lithium producer’s shares fell after Pilbara reported weaker-than-expected full-year results. Earnings reports will remain focused, with FMG announcing its 2023 full-year earnings on Monday. On the economic front, the Australian retail sales and CPI data for July are in the spotlight this week.
What are we watching?
- Bond yields stay high: The US 2-year bond yield rose to 5.07% on Friday, the highest level seen in March and June 2006, following Fed Powell’s hawkish speech as markets priced in more rate hikes ahead.
- US dollar strengthens further: The US dollar index rose for the sixth straight week, closing above 104 for the first time since 31 May, while Japanese Yen and Chinese Yuan are among the weakest Asian currencies due to policy divergence between central banks.
- Gold rebounds: Gold snapped a four-week losing streak as risk-off sentiment supported haven assets. Spot gold found support around 1,885, finishing above the key level of 1,900, suggesting the precious metal may be in favour of investors again amid market uncertainties.
- Bitcoin eases losses: Bitcoin managed to firm around key support of 26,000 as the crypto market may have been oversold recently. Central banks’ policy concerns and uncertainties around fiat currency may have also added support.