The market has experienced a week of panic and volatility, especially on Monday, when Japan's Topix index fell 12%, the VIX index soared 42 points in a few hours, and the S&P 500 index fell more than 4% at one point. But the volatility soon eased, and the S&P 500 staged its biggest rebound since 2022 on Thursday and managed to close basically unchanged in its most turbulent week since 2022, while recession concerns eased, interest rate cut expectations continued to fall from Monday, and the Bank of Japan was also considered unlikely to raise interest rates again in the short term. In addition, a narrative gradually emerged that the market was so nervous at the beginning of the week mainly reflecting forced selling, and this tension may ease once investors take a breath.
Based on the above background, at the close of Friday, the losses of the three major U.S. stock indexes this week were almost completely wiped out; the 10-year U.S. Treasury bond yield rose by more than 15 basis points this week; the U.S. dollar index fell slightly by 0.05% for the week; the yen stopped its three-day rally, and its trading range this week was 141.70-147.90; oil prices rose for four consecutive days, with both U.S. and Brent crude oil rising by more than 4% in a week; gold fell by more than 0.6% for the week, marking the largest weekly drop since June 7.
In the coming week, investors will turn their focus to economic data, including the US July CPI consumer inflation data and the retail sales data commonly known as the "horror data". The following are the key points that the market will focus on in the new week (all Beijing time):
Central Bank News: The Fed has no "urgency", and economists expect only a 25 basis point cut in September
Fed: Not expected to comply with calls for a big rate cut, and an emergency rate cut is unlikely
At 01:15 on Wednesday, 2024 FOMC voting member and Atlanta Fed President Bostic spoke on the economy
At 21:10 on Thursday, 2025 FOMC voting member and St. Louis Fed President Moussalem will speak on the U.S. economy and monetary policy
At 01:10 on Friday, Harker, 2026 FOMC voting member and President of the Philadelphia Fed, delivered a speech
Investors are waiting for further clues on how big a possible rate cut might be in September. Comments from Fed officials last week reflected that it was highly unlikely the central bank would cut rates between meetings, and expectations for a rate cut continued to fall.
Most economists surveyed expect the Fed to cut interest rates by only 25 basis points in September, contrary to calls from some of Wall Street's largest banks for a larger rate cut. Futures investors are pricing in 100 basis point rate cuts by the end of the year, with 50 basis point cuts starting next month. However, the consensus among economists is that the Fed will cut interest rates by 25 basis points at each of its meetings in September, November and December, as well as in the first quarter of next year.
Other central banks: RBNZ faces tough choices
At 10:00 on Wednesday, the Reserve Bank of New Zealand announced its interest rate decision and monetary policy statement; at 11:00, the Chairman of the Reserve Bank of New Zealand, Orr, held a monetary policy press conference.
At 16:00 on Thursday, the Norwegian Central Bank will announce its interest rate decision
At 07:30 on Friday, the Chairman of the Reserve Bank of Australia, Bullock, the Deputy Chairman, Hauser, and three assistant chairmen, Hunter, Kent and Jones, testified before the House Standing Committee on Economics.
At 08:30 on Friday, New Zealand Reserve Bank Chairman Orr will deliver a speech
Economists at HSBC Global Research said in a report that the Reserve Bank of New Zealand's interest rate decision next week may be a tough choice between cutting or keeping rates unchanged. Economists said the Reserve Bank of New Zealand turned more dovish at its early July meeting, opening the door to a rate cut, and the recent global financial turmoil has increased the risk of a larger global recession, which may affect the central bank's thinking.
UBS believes that the Reserve Bank of New Zealand is expected to keep interest rates unchanged next week. Prashan Newnaha, a strategist at TD Securities, said there is a certain urgency for the Reserve Bank of New Zealand to start cutting interest rates. He said that since 2022, the economy has been in and out of recession, and economic activity data show that the growth outlook has further deteriorated, so the conditions for a rate cut are in place. Nomura Securities analysts called for a 25 basis point rate cut at next week's meeting.
Important data: CPI leads the way in heavy data release, the US dollar is expected to decline, and pessimism about commodities is widespread
Monday 23:00, US New York Fed 1-year inflation forecast for July
Tuesday 14:00, UK June three-month ILO unemployment rate, UK July unemployment rate, UK July unemployment benefit applicants
At 17:00 on Tuesday, the German ZEW Economic Sentiment Index for August and the Eurozone ZEW Economic Sentiment Index for August
At 20:30 on Tuesday, the annual rate of PPI in July and the monthly rate of PPI in July in the United States
At 14:00 on Wednesday, the UK July CPI monthly rate and the UK July Retail Price Index monthly rate
At 17:00 on Wednesday, the revised annual GDP rate of the euro area in the second quarter, the seasonally adjusted employment rate in the euro area in the second quarter, and the monthly industrial output rate in the euro area in June
At 20:30 on Wednesday, the US July unadjusted CPI annual rate, seasonally adjusted CPI monthly rate, seasonally adjusted core CPI monthly rate, unadjusted core CPI annual rate
Thursday 09:30, Australia's seasonally adjusted unemployment rate for July
At 14:00 on Thursday, the revised annual rate of UK GDP in the second quarter, the monthly rate of UK GDP in June, and the monthly rate of UK manufacturing/industrial output in June
At 20:30 on Thursday, the number of initial jobless claims in the United States for the week ending August 10, the monthly rate of retail sales in the United States in July, and the New York Fed/Philadelphia Fed manufacturing index in the United States in August
At 14:00 on Friday, the UK's July seasonally adjusted retail sales monthly rate
At 22:00 on Friday, the initial value of the US one-year inflation rate forecast for August and the initial value of the University of Michigan Consumer Confidence Index for August
As the sharp rebound in jobless claims on Thursday showed, the market is extremely data-sensitive at the moment. This strong reaction also shows that market sentiment remains fragile. This also brings asymmetric risks to a series of data next week. If any of them disappoints, concerns about a hard landing could easily become the focus again.
If the data reinforces expectations of rate cuts again, it will be bad for the dollar. A survey by Bank of America showed that the proportion of investors who believe that the dollar will weaken has almost tripled in the past month as the market prepares for the Fed's rate cut. In the bank's monthly sentiment survey, about 23% of respondents said that their most confident trade was to short the dollar, which is the highest proportion so far this year. But it is worth noting that the current interest rates in the United States are still high compared with other developed economies, which may be enough to keep the dollar strong. Next week's US CPI inflation data will also be key to determining the direction of US Treasury yields.
Analyst Matt Simpson said that the US CPI, retail sales and consumer confidence index will be closely watched, especially if consumer spending and confidence data are lower than expected, which may trigger market concerns about economic slowdown. Personally, I think the US CPI data in July may continue to weaken, which will suppress US bond yields and the US dollar index. But if retail sales and consumer confidence remain stable, the market may reassess expectations for interest rate cuts next year.
Next week is particularly packed with UK economic data, including employment data on Tuesday and inflation data on Wednesday, and traders are likely to continue to watch the data for clues on the Bank of England's policy. The pound may continue to weaken on bets on UK interest rate cuts. Capex.com, an online broker, said the pound may continue to be under pressure as the market bets on further rate cuts from the Bank of England, although expectations of more aggressive rate cuts from the Federal Reserve should ease the decline. UBS Global Wealth Management said that the pound may strengthen against the dollar for the rest of the year as the Federal Reserve may cut interest rates more aggressively than the Bank of England.
The impact of economic data on commodities is also increasing. At present, concerns about a further economic slowdown have cast a shadow on demand for everything from crude oil to metals and grains. Hedge funds are the most pessimistic about commodity prices in at least 13 years, with money managers piling up nearly 153,000 net short positions in futures and options on 20 commodity markets in the week ending Tuesday. This is the highest level on record, based on data going back to 2011. The recent market turmoil caused by concerns about a US recession has exacerbated the situation.
Among them, the bullish sentiment of Brent crude oil hit a record low. According to data from the Intercontinental Exchange (ICE), speculators' net long positions in ICE Brent crude oil decreased by 52,552 contracts to 25,438 contracts, a new low since data was recorded in January 2011. However, analysts at wholesale fuel distributor TACenergy wrote in a memo to clients that unexpected economic data and "vague and pervasive 'tensions in the Middle East'" are driving up crude oil futures prices.
Important events: Geopolitics is a mess, will gold continue to be bullish?
Iranian Guard officials said the Supreme Leader's order to "severely punish" Israel would be carried out.
The Wall Street Journal reported on the 9th, citing U.S. officials, that the United States has warned Iran that if Iran launches a large-scale attack on Israel, the Iranian government and economy may suffer a devastating blow. The official said that the United States has sent a clear message to Iran that if they launch a major retaliatory attack on Israel, the risk of escalation will be very high.
Israeli forces attacked a school in Gaza City early Saturday, with Hamas saying about 100 Palestinians were killed, a report that quickly sparked outrage and was questioned by the Israeli military. The IDF said the airstrike targeted militants operating from a command center inside the Al-Taba'een school and that about 20 "Hamas and Islamic Jihad militants, including senior commanders," were using the base "to carry out terrorist attacks." Qatar's Foreign Ministry called the bombing a "barbaric crime against unarmed civilians." Turkey said the attack showed that Netanyahu's government "intends to undermine negotiations for a permanent ceasefire." The United States, Qatar and Egypt called for a new round of talks on August 15, the latest attempt by the Biden administration to end the war in Gaza even as the region braces for an expected Iranian attack on Israel. Israel said it would send a delegation, while Hamas has yet to respond.
Iran’s ongoing research activities put it in a better position to launch a nuclear weapons program, even though it has not yet done so, according to a new assessment by U.S. intelligence agencies, The Wall Street Journal reported.
According to Al Arabiya TV, sources said Israel attacked a car on the edge of the Lebanese port city of Sidon, killing two Hamas members. The Israeli attack targeted Hamas security official Samer al-Haj.
In addition, the conflict between Russia and Ukraine is also heating up. The Director General of the International Atomic Energy Agency, Grossi, issued a statement on Friday, expressing concern about the threat posed by the fighting between Russia and Ukraine in the Kursk region of Russia to local nuclear power plants. In recent days, Ukraine has launched a large-scale cross-border offensive against the Kursk region of Russia. According to RIA Novosti, Russia has declared a federal state of emergency in the Kursk region. In addition, the Lipetsk region of Russia suffered a "large-scale" drone attack.
Intelligence sources say Iran will soon deliver hundreds of ballistic missiles to Russia, and dozens of Russian military personnel are currently receiving training in Iran to use ballistic missile systems.
Gold has plunged below $2,400, and analysts believe that bulls may continue to "buy on dips." There are many things that can affect the gold market at the moment, the most important of which is geopolitics, which is absolutely a mess right now. Analyst Christopher Lewis said, "Gold has a lot of support at the $2,300 level, and any decline will be seen as a potential buying opportunity, but frankly, I don't think we will get close to the $2,300 level any time soon. In fact, I think we are likely to end up breaking out to the upside much sooner. Recently, we saw gold try to hit the $2,500 level and failed, but eventually we will not only reach that level, but break through it. Gold is undoubtedly in an upward trend, so I won't sell gold anyway."
Tim Waterer, chief market analyst at KCM Trade, said that fundamentally, gold will benefit from increased risk aversion or expectations of loosening monetary conditions. There may be a variety of scenarios in the coming months, which may drive gold prices to all-time highs.
GSC Commodity Intelligence analysts said that the reality is that we are now in an environment with only three possible outcomes: faster and more aggressive rate cuts by the Federal Reserve, a recession, or another financial crisis. All of these provide an extremely bullish backdrop for gold. The big question now is how high will gold prices go in August? Only time will tell, but what is certain is that gold is moving in a positive direction that will ultimately indicate that prices will soon hit new highs in the coming weeks and months.
TD Securities remains cautiously optimistic, saying that the market moves of the past few months have led to macro funds capitulating and systematic trend followers engaging in massive selling. Gold is currently the most eye-catching, with algorithmic trading and macro funds still holding most long positions, fund managers' total holdings still close to cycle highs, and a unilateral bullish consensus. However, gold cannot resist deleveraging events. Signs of selling in the Chinese market remain, and top traders in Shanghai continue to reduce some of their net long positions in gold. Behind this, the trend of long liquidation is only masked by the simultaneous short covering. Looking ahead, the short positions of top traders in Shanghai are now close to pre-epidemic levels, suggesting that there is more room for continued long liquidation to put pressure on prices, especially considering that physical traders are still in a state of resisting longs.
Company financial reports: Has the US stock market adjustment ended?
Q2 financial reports will be released intensively next week. Important stocks such as Alibaba (09988.HK), Tencent Holdings (00700.HK), JD.com (09618.HK), China Unicom (00762.HK), and UBS (UBS.N) will announce their financial reports next week.
A bullish signal is emerging from the noise in the stock market after a huge shock: Buy the dip. Investors poured nearly $10 billion into stock funds in the week ended Wednesday, including $3.3 billion in inflows into technology funds, according to EPFR Global data cited by Bank of America in a report.
“The initial panic was overdone,” said Gerry Fowler, head of European equity and global derivatives strategy at UBS. “The market will slowly regain confidence, but we will not see volatility fully return to very low levels and it may be difficult for the market to confidently make new highs.”
Major institutions remain cautious about whether the US stock market has bottomed out. JPMorgan Chase's trading department said the market trend may still go slightly higher, but it needs to see evidence that the economy is still in growth mode. Goldman Sachs is also cautious, but slightly more optimistic, believing that the market has bottomed out in the short term. Investors need to pay close attention to future economic data and policy trends to determine whether the market has truly bottomed out.
Market Holiday Arrangement:
On Monday (August 12), Japan's Tokyo Stock Exchange was closed for one day due to the Yamaguchiko Day.
On Thursday (August 15), the Seoul Stock Exchange in South Korea was closed for one day due to Liberation Day. The Milan Stock Exchange in Italy was closed for one day due to the Assumption of the Virgin Mary.
The article is forwarded from: Jinshi Data