- Nasdaq index closed with a 0.20% dip on Friday, while the S&P 500 index saw a slight 0.01% decrease; Dow Jones index gained 0.07%.
- The Dollar Index ended the week at 103.4, reflecting a 0.5% increase, while Brent crude oil closed at $84.8 USD per barrel, down 2.3%.
- 10-year U.S. Treasury yield remained at 4.25%, but the 2-year U.S. Treasury yield rose by 4 basis points to 4.94%.
- Jackson Hole Economic Policy Symposium, starting Thursday, gathers central bank leaders and economists to discuss global economic conditions and policy prospects.
- Fed Chairman Powell’s Friday speech at the symposium is keenly anticipated for insights into the Fed’s monetary policy direction.
- August S&P Global Manufacturing and Services Sector PMI data to be released Wednesday, with Manufacturing PMI holding steady at 49, Services PMI expected to dip to 52.
- Durable Goods Orders data, expected Thursday, shows a 4.6% increase in June, signifying investment resilience.
- Weekly initial jobless claims data for Thursday indicated continued low levels at 239,000.
- Existing home sales for July to be released Tuesday, new home sales for July follows on Wednesday.
- University of Michigan Consumer Confidence Index for August, due Friday, slightly down to 71.2 from a record high of 71.6.
- ECB President Lagarde’s Friday speech in Europe anticipated for potential signals about monetary policy shifts.
- August Flash Manufacturing and Services Sector PMI data for Europe, releasing Wednesday, reveals continued contraction.
- France, Germany, Eurozone, and UK experienced declines in Manufacturing PMIs in July.
- Services PMIs for July showed contraction in France, slowdown in Germany, Eurozone, and the UK.
- Germany’s Wholesale Price Index for July fell 0.3%, attributed to lower energy prices.
- Germany’s IFO Business Climate Index for August showed decline from 88.6 to 87.3, reaching its lowest point since November.
- German GDP growth for Q2 2023 likely to remain stagnant at 0%, marking an exit from recession.
- Eurozone’s preliminary Consumer Confidence Index for August at -15.1, indicative of ongoing challenges.
- People’s Bank of China cut 1-year Loan Prime Rate to 3.45%, while keeping 5-year LPR at 4.20%.
- PBoC urging banks to increase lending in Asia draws attention.
- Bank of Korea’s meeting to maintain policy interest rate at 3.50%, considering inflation and economic conditions.
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US Market Outlook and Economic Events
U.S. Market Performance and Financial Indicators
On Friday, the Nasdaq index wraped up the day with a minor dip of 0.20%. Similarly, the S&P 500 index experienced a slight decrease of 0.01%. On a contrasting note, the Dow Jones index managed to eke out a gain of 0.07%.
The Dollar Index garnered attention as it concluded the week at 103.4, marking a notable 0.5% increase. Meanwhile, the landscape of crude oil took a different turn, with Brent crude oil concluding the week at $84.8 USD per barrel, reflecting a notable 2.3% decrease.
The 10-year U.S. Treasury yield remained steady at 4.25% by the end of the week. The shorter-term 2-year U.S. Treasury yield, which often serves as a litmus test for developments in monetary policy, witnessed an increase of 4 basis points, closing the week at 4.94%.
Jackson Hole Economic Policy Symposium
Shifting focus to the forthcoming week, all eyes are on the Jackson Hole Economic Policy Symposium set to kick off on Thursday. This prestigious annual event, organized by the Kansas City Fed, brings together a global consortium of central bank presidents, finance ministers, and academic luminaries.
Over the course of three days, these influential figures will delve into discussions encompassing the contemporary global economic panorama, evaluations of upcoming monetary policy prospects, and the potential trajectories of new policy directions.
A significant highlight of the event is the eagerly awaited speech by Federal Reserve Chairman Powell on Friday. Market participants are poised to scrutinize his address for nuanced signals that could provide insights into the future trajectory of the Fed’s monetary policy strategy. This anticipation stems from the recently unveiled minutes of the July meeting, in which the Federal Reserve signaled its concerns about inflation persistently hovering above the long-term 2% target.
The minutes also underscored the continuing presence of upward risks, attributed to labor market tightness, which might necessitate further tightening of the monetary policy.
In addition to Powell’s discourse, speeches throughout the week by various other Federal Reserve members will also command close attention as they might unveil new indications about the central bank’s prospective monetary policy stance.
Economic Data Releases: PMI and More
On the economic data front, the week will witness the release of pivotal information, starting with the August S&P Global Manufacturing and Services Sector PMI data scheduled for Wednesday.
Against expectations of a marginal dip in the Manufacturing PMI for July, the index managed to climb from 46.3 to 49, signaling a noticeable deceleration in the manufacturing sector’s contraction rate. However, the Services PMI for July exhibited a different trajectory, slipping from 54.4 to 52.3, indicating a slowdown in the growth of the service sector. It’s noteworthy that the service sector remained in the growth zone for the preceding six months. This deceleration was attributed to the drag imposed by high interest rates on consumer spending, leading to a more sluggish growth in new sales.
Looking ahead to August, preliminary data suggests that the Manufacturing PMI will remain stable at 49, mirroring the previous month’s stance and underscoring a persistent contraction in the manufacturing sector. On the flip side, the Services PMI is anticipated to undergo a slight decline from 52.3 to 52, indicating a mild deceleration in the growth rate of the service sector.
Durable Goods Orders and Employment Data
Later in the week, market participants are eagerly awaiting the preliminary July data for Durable Goods Orders, set to be unveiled on Thursday. After a robust 2% monthly increase in May, Durable Goods Orders surged by a substantial 4.6% in June, maintaining an upward trajectory for the fourth consecutive month. Notably, the category excluding aircraft, which serves as an indicator of firms’ investment spending, registered a 0.1% monthly uptick in June, suggesting a gradual resurgence in investments.
Further insights into the economic landscape will emerge from the weekly initial jobless claims data due on Thursday. The previous week witnessed a decrease in initial jobless claims from 250,000 to 239,000, slightly surpassing expectations and underscoring the persistently tight labor market conditions.
In parallel, the week will witness scrutiny of data emanating from the housing market. Existing home sales data for July is slated for release on Tuesday, followed by new home sales data for July on Wednesday. The previous month saw existing home sales declining by 3.3% in June, a confirmation of the impact of tightening financial conditions following the Federal Reserve’s interest rate hikes. The sentiment was mirrored in new home sales data for June, which indicated a 2.5% monthly decline, further highlighting a weakening trend in the housing market.
Consumer Confidence Index
The week culminates with the release of the final reading of the University of Michigan Consumer Confidence Index for August on Friday. The preliminary reading for the Consumer Confidence Index in August nudged down slightly from the record level of 71.6 since October 2021 to 71.2, aligning well with expectations.
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European Economic Outlook and Economic Events
ECB President’s Speech
Shifting our gaze to Europe, a spotlight is on the upcoming speech by ECB President Lagarde on Friday. This speech assumes significance in a context where market observers closely monitor utterances by Lagarde and other ECB members for any potential signals hinting at shifts in the Bank’s monetary policy strategies.
In Europe, the focus of the markets will be on Friday’s speech by ECB President Lagarde. In this context, speeches by Lagarde and other ECB members will be closely monitored for possible new signals regarding the Bank’s monetary policy.
European PMI and Economic Data
Wednesday will witness the release of the August Flash Manufacturing and Services Sector PMI data for the region. This data provides vital insights into the most recent economic outlook. Notably, Manufacturing PMIs across the region exhibited a trend of decline in July, slipping below the crucial 50 threshold, a signal of contraction. The pace of contraction notably accelerated during this period, with Manufacturing PMIs for July witnessing a notable downturn. Specifically, Germany’s Manufacturing PMI fell from 40.6 to 38.8, the Eurozone’s declined from 43.4 to 42.7, France’s slid from 46 to 45.1, and the UK’s decreased from 46.5 to 45.3.
Services PMIs for July depicted a consistent trend of contraction in the French sector, alongside a growth slowdown in other regions. French Services PMIs slipped from 48 to 47.1, indicative of an escalated pace of contraction. Meanwhile, in Germany, the Services PMI decreased from 54.1 to 52.3, the Eurozone’s slipped from 52 to 50.9, and the UK’s dropped from 53.7 to 51.5, signaling a slowdown in the growth of the service sector.
While preliminary August data hints at Manufacturing PMIs showing a slight decline below the 50 threshold, Services PMIs are also projected to record a modest descent in Germany, the Eurozone, and the UK, signaling a subdued growth pace for the service sector.
Germany’s Economic Indicators
As the week commences, attention will turn to Germany’s Wholesale Price Index for July. In the previous month, Germany’s Wholesale Price Index registered a marginal monthly decline of 0.3%, chiefly driven by a decrease in energy prices. Annually, the index displayed a slide from 1% to 0.1%, marking the lowest point since December 2020. Looking ahead to August, the index is poised for a 0.3% monthly decline and an annual drop of 5.2%.
Friday ushers in the release of Germany’s IFO Business Climate Index for August. This index offers insights into firms’ evaluations of both present and future economic conditions across various sectors, including manufacturing, construction, wholesale, and retail trade. Notably, the July reading saw a decline from 88.6 to 87.3, surpassing expectations, and marking its third consecutive month of descent, hitting its nadir since November.
GDP Growth and Eurozone Consumer Confidence
On the economic growth front, Friday brings the culmination of data regarding Germany’s GDP growth in the second quarter of this year. The preceding quarters witnessed a contraction of 0.4% and 0.1% in the last quarter of the previous year and the first quarter of this year, respectively. These contractions were primarily attributed to concerns regarding the energy crisis and the consequential tightening financial conditions that impacted consumer spending and reduced public expenditures. Preliminary data hints at a stagnant 0% growth in the second quarter of this year, marking a departure from the preceding recessionary phase.
The Eurozone’s preliminary Consumer Confidence Index for August is also slated for release on Wednesday. The preceding month saw the Consumer Confidence Index registering a level of -15.1, the highest since February 2022. This suggests a persistently bleak trajectory in the negative zone due to the ongoing ramifications of the ECB’s interest rate hikes.
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Asian Economic Outlook and Economic Events
Asia’s Financial Landscape
Shifting the focus to Asia, significant developments have unfolded. The People’s Bank of China’s (PBoC) strategic maneuvering came into play as it trimmed the 1-year Loan Prime Rate (LPR) for short-term loans from 3.55% to 3.45%. This tactical reduction is geared towards propping up economic activity in the region. However, in a surprising twist, the PBoC opted to keep the 5-year LPR for longer-term loans, such as mortgages, unaltered at 4.20%, contrary to prevailing expectations.
Furthermore, the spotlight is on reports shedding light on the PBoC’s calls to banks to boost lending. These reports have captured market attention, fueling discussions about potential ripple effects across the financial landscape.
Bank of Korea Meeting and Concluding Thoughts
As the week unfolds, all eyes will be on the Bank of Korea’s meeting scheduled for Thursday. In its previous meeting, the bank chose to maintain the policy interest rate at 3.50%, aligning with consensus expectations. This decision came on the heels of a rate hike in January. Of note is the bank’s emphasis on the ongoing deceleration of the inflation rate in the country, even as it is anticipated to remain perched above the 2% target level for an extended period. Anticipations are rife that the bank will maintain the status quo in this week’s meeting, underscoring a continuity in policy measures.