📊 Market Report:
Federal Reserve Chair Jerome Powell’s speech at an annual symposium will be closely watched for any signals on the timing, size, and pace of cutting rates. Officials at the Kansas City Fed’s annual gathering believe it’s appropriate to begin easing soon, with traders pricing in a quarter-point cut. This is an inflection point as the Fed transitions from hikes to cuts and back to considering both inflation and employment mandates. Open questions remain around inflation persistence and whether job market dynamics have fundamentally changed.
💬 Fed officials, such as Collins, Harker or Schmid have made homogeneous comments, advocating a gradual rate cut to support the US labour market, always in line with the corresponding inflation data. It all sounds very reasonable, no surprises here.
📈 However, Recent US data has not strongly argued for a 50bp Fed rate cut in September, and most FOMC members have pushed back against that prospect. Services PMIs were stronger than expected, initial jobless claims rose slightly as expected, and continuing claims were lower than expected.
🤔 The question is whether Powell will go so far as to suggest a 50bp hike later this year, if not in September. Powell might reaffirm the importance of both parts of the mandate, stressing the need for evidence and essentially delaying any more significant changes in rate expectations until the NFP payrolls report on September 6.
🇬🇧 UK: British consumer confidence held steady at a near 3-year high in August according to the GfK survey. Enthusiasm for major purchases rose to its highest since January 2022 while the outlook for personal finances also increased. This may be due to an interest rate cut in August boosting the housing market and hopes of further reductions, though the BoE has signaled a gradual approach.
📉 Market View:
Yesterday markets fell after the release of the US employment and PMI data. The issue, as we have already mentioned, is that they were relatively more positive than expected, and this is causing traders to have doubts about the Fed’s stance.
📊 The SP500 pulled back, losing 5600 points, but during the Asian session it has recovered and looks stable for the moment. The Nasdaq 100, which was close to crossing the 20,000 mark, also retreated and now trades at 19,625. The Russell 2000, which is independent of the technology sector, performed better and barely retreated and is now trading at 2150 points.
💵 The dollar index DXY quickly showed strength after the data, rising above 101.50 points, but has not managed to prosper much further. The EURUSD, which almost reached 1.1180, also retreated, but is holding at 1.1125 for the time being.
📈 The US 2-year bond, which we usually use in this report as a compass for interest rates, responded moderately higher, hovering just above 4% yield at the moment.
🇪🇺 The European market, in our opinion artificially inflated, is indifferent to this turbulence and seems to continue its bullish tone as if nothing is happening. The Dax 40 is about to reach resistance at 18600 points.
💰 Bitcoin continues to attack the 61,300 point zone, and gold does not retreat and remains above 2500 $ per ounce. Crude oil has a negligible rebound of $2 per barrel since yesterday.
🌍 Geopolitics:
Kamala Harris was officially nominated as the Democratic Party’s presidential candidate. Harris declared her loyalty to the military complex, affirming that they will maintain their stance on the war in Ukraine and reaffirming arms support for Israel as well.
📈 Surprisingly, she mentioned a more strategic approach, announcing that cooperation with Europe would continue, but that there would be a ‘gradual shift towards the Indo-Pacific region’. Those of us who follow international trade relations know what she means. After the Biden administration destroyed Germany’s economic ties with Russia, and promised Germany that the US would unconditionally supply Europe with liquid gas, but at an expensive price. Now, the US is beginning to divert its gas supplies to other customers in the Asian region, who pay better than Europe. To quote the late strategist Kisinger, ‘To be America’s enemy may be dangerous, but to be America’s friend is fatal’.
📊 The largest poll to date, with almost 6 million votes, remains the Social Network X poll. The result shows 73% of voters preferring Trump over Kamala Harris for President of the United States.
⚠️ Yesterday night, NATO air base in Geilenkirchen, Germany raised its security level to the second highest (Charlie) based on an unspecified potential threat. NATO has warned of a campaign of hostile Russian activities including sabotage and cyberattacks targeting the alliance.
