✅ Daily Market Analysis - TUESDAY AUGUST 01, 2023Key News:
Australia - RBA Interest Rate Decision (Aug)
UK - S&P Global/CIPS UK Manufacturing PMI (Jul)
USA - ISM Manufacturing PMI (Jul)
USA - JOLTs Job Openings (Jun)
On Monday, both Wall Street and global stocks displayed minimal changes, indicating relative stability in the markets. However, oil prices recorded some gains, and the US dollar remained mostly steady. Market participants were closely monitoring upcoming corporate earnings, central bank meetings, and an important employment report scheduled for this week.
The Dow Jones Industrial Average experienced a slight increase of 0.11%, reaching 35,499.78, while the S&P 500 remained nearly unchanged at 4,582.45. The Nasdaq Composite also saw a modest gain of 0.07%, reaching 14,326.87. The overall market sentiment seemed cautious as investors awaited significant events that could potentially impact the financial landscape.
In the coming days, traders will be paying close attention to corporate earnings reports, as they can significantly influence stock prices and market sentiment. Additionally, central bank meetings are scheduled, which can provide insights into monetary policy decisions that may influence currency markets and investor confidence.
Moreover, an important employment report is eagerly anticipated by market participants. This data release can have a considerable impact on market dynamics, particularly in the context of the ongoing recovery from the global economic challenges posed by the pandemic.
Nasdaq indices daily chart
SPX indices daily chart
This week, investors are eagerly anticipating earnings reports from several notable companies, including Apple Inc (NASDAQ: AAPL) and Amazon.com (NASDAQ: AMZN), scheduled to release their reports on Thursday. The market will closely monitor these results, as they can have a significant impact on individual stock prices and broader market sentiment. Additionally, earnings reports are also expected from well-known companies like Caterpillar Inc (NYSE: CAT), Starbucks Corp (NASDAQ: SBUX), and Advanced Micro Devices (NASDAQ: AMD), adding to the week's eventful financial calendar.
European Markets Record Positive Session
European markets had a positive session, concluding a strong month of gains. The DAX achieved yet another record high, reflecting the market's optimistic outlook. Meanwhile, the CAC 40 rebounded strongly after experiencing a significant two-day sell-off just under a week ago, indicating renewed investor confidence. The overall performance of European markets suggests a favorable market sentiment and hints at the possibility of further growth in the region.
As the week progresses, investors will be closely watching earnings reports and market developments for potential market-moving events. The combination of key company results and overall market performance will shape investor sentiment and guide market trends in the near future.
CAC40 indices daily chart
The FTSE100 index displayed impressive performance, reaching a two-month high, signaling a positive trend in the market. Notably, housebuilders stood out as they experienced a notable rebound in their stock prices. This surge in housebuilders' stocks can be attributed to a decrease in expectations for interest rate hikes, which have subsided from the peak levels observed a few weeks ago.
The overall market sentiment appears to be optimistic, with investors gaining confidence in the stability of the market. The positive momentum in the FTSE100 index indicates a favorable outlook for investors and suggests potential growth opportunities in various sectors. As interest rate hike concerns ease, housebuilders, in particular, have benefited, leading to an upswing in their stock prices.
FTSE 100 daily chart
The positive momentum observed in global markets can be attributed to significant gains in Chinese equity markets. Chinese policymakers have signaled their intention to implement measures aimed at bolstering the economy in the coming weeks. This stance from Chinese authorities has boosted investor confidence and contributed to the overall positive sentiment in global markets.
Japanese Yen Weakens as Bank of Japan Takes Unanticipated Measures
The Japanese yen experienced weakness today following unexpected moves by the Bank of Japan. The central bank intervened by purchasing bonds in an effort to lower yields after the 10-year Japanese Government Bond (JGB) yield surged above 0.6%, surpassing the bank's upper target of 0.5%. As a result of this intervention, the yen slid to a three-week low against the US dollar.
The Bank of Japan's decision to take action to control bond yields reflects its commitment to maintaining stability in the financial markets. However, the unanticipated move had an impact on the yen's value, leading to a decline against the US dollar.
USD/JPY daily chart
The Australian dollar experienced a significant increase, driven by short covering ahead of tomorrow's Reserve Bank of Australia (RBA) rate meeting. Traders speculated that the central bank might raise rates by another 25 basis points. Initially, the consensus was for the RBA to maintain rates unchanged, but weaker-than-expected Q2 CPI figures from last week suggested that the necessary adjustments had already been made.
Although there was a slight decline from 5.5% to 5.4% in annual inflation, which is still relatively high, the unemployment rate at 3.5% could entice the RBA to raise rates from 4.1% to 4.35%. However, with Purchasing Managers' Index (PMI) readings indicating contraction, there is a risk that such a move could be precarious.
The surge in the Australian dollar reflects market expectations and speculation surrounding the RBA's rate decision. Investors are closely watching the central bank's actions and statements for further insights into its monetary policy stance. As economic indicators continue to influence the RBA's decision-making, traders will be cautious about the potential implications of a rate hike in the context of ongoing challenges in certain sectors of the Australian economy.
AUD/USD daily chart
As Thursday approaches, all eyes are on the British pound, with the Bank of England's rate decision scheduled for that day. The financial markets widely anticipate another rate hike, with the only uncertainty being the magnitude of the increase, whether it will be 25 basis points (bps) or 50 bps.
Today's mortgage approvals data for June provided some insights into the state of the housing market. The data suggested robust demand, but there are indications that this could be primarily attributed to strong interest in fixed rate rollovers. The net lending figure showed only a modest increase of £0.1 billion.
The upcoming rate decision will be closely monitored by investors, as it can have a significant impact on the British pound and financial markets. Depending on the magnitude of the rate hike, market participants will assess the Bank of England's stance on inflation and economic growth, which will shape the outlook for interest rates going forward.
The Bank of England's policy decisions are of utmost importance in the current economic landscape, as central banks worldwide grapple with managing inflationary pressures and navigating the post-pandemic recovery.
XAU/USD daily chart
Gold prices are showing signs of a potential reversal from their losses experienced in June, but they have yet to breach the crucial resistance level of $2,000 per ounce. The depreciation of the US dollar has played a significant role in supporting gold prices, helping them recover from their lows.
Despite firmer long-term yields, there is a growing acceptance in the markets that US interest rates are likely to remain elevated for an extended period. This perception is buoying gold prices, as investors seek a hedge against the potential impact of sustained higher interest rates on other asset classes.
Investors are closely monitoring the developments in the global economy, inflation, and central bank policies to gauge the outlook for gold prices. Geopolitical uncertainties and ongoing pandemic-related challenges also contribute to the demand for safe-haven assets like gold.
As gold prices attempt to stage a comeback, investors are keenly observing any break above the critical $2,000 resistance level, which could signal further upside potential. The future trajectory of gold will be influenced by a complex interplay of factors, including the US dollar's performance, interest rate expectations, and global economic conditions.
