✅ Daily Market Analysis - MONDAY AUGUST 07, 2023

7 באוג׳ 2023

Key News:

USA - FOMC Member Harker Speaks
USA - FOMC Member Bowman Speaks
UK - BoE MPC Member Pill Speaks


European markets managed to eke out modest gains on Friday, offering a small respite after enduring an overall negative week. The prevailing market sentiment was burdened by worries related to earnings guidance downgrades and the continuous rise in long-term yields.

Nevertheless, the release of a mixed US jobs report played a role in stabilizing sentiment and provided a lift to the DAX and FTSE100 from their weekly lows. The report indicated a slowdown in jobs growth during July, coupled with downward revisions to previous months' data. This suggested that the central bank's rate hikes have had an impact and that no further rate hikes are anticipated at this time. The combination of these factors contributed to the market's rebound towards the end of the week.


DAX Indices H4 chart


FTSE 100 indices H4 chart

The S&P 500 index encountered a decline, mainly influenced by a drop in Apple's stock and a mixed July jobs report. The report revealed that job gains in July were lower than anticipated, but there was a slight increase in wages, leading to concerns about the possibility of a re-acceleration in inflation.

As a result of these factors, the S&P 500 index experienced a 0.5% decrease, while the Dow Jones Industrial Average fell by 0.4% or 143 points, and the Nasdaq saw a decline of 0.2%. The market's reaction to the employment data and Apple's performance weighed on investor sentiment, contributing to the overall downturn in the indices.


NASDAQ indices H4 chart


SPX500 indices daily chart

In July, the economy added 187,000 new jobs, which was slightly below economists' expectations of 200,000. However, there was a slight uptick in average hourly earnings, and the unemployment rate unexpectedly declined, indicating that the labor market remains tight. This situation may prompt the Federal Reserve to consider further actions to curb economic growth and manage inflation.

Interestingly, Treasury yields experienced a decline as investors speculated that the Fed might have already concluded its last interest rate hike in the previous month. It appears that the tightening measures implemented thus far are starting to have an impact on the economy and the labor market. The market sentiment is reflecting the belief that the Fed may be cautious in pursuing additional rate hikes, considering the current economic conditions and employment data.

Economists from Pantheon Macroeconomics emphasized that they still expect inflation numbers to be robust enough to influence the Federal Reserve's decisions in September. However, they acknowledge that the situation is uncertain and not a definite outcome. Investors are closely monitoring these economic indicators and policy developments to navigate the market's prevailing uncertainty.

Despite Apple Inc (NASDAQ: AAPL) reporting better-than-expected quarterly results, the company's stock experienced a significant decline of more than 4%. The drop was attributed to concerns regarding weaker iPhone demand persisting into the current quarter. While Apple's management is actively working on improving operational efficiency through cost-cutting measures, UBS pointed out that the challenging smartphone market, especially in developed regions, may act as a headwind for the company's stock performance throughout the remainder of 2023. The market sentiment towards Apple's stock remains cautious as investors carefully assess the company's outlook and its ability to navigate through market challenges.


Apple stock daily chart

In contrast, Amazon.com Inc (NASDAQ: AMZN) received praise for its outstanding performance in the earnings report. The company's stock surged by 9% following the announcement of better-than-expected results for the second quarter. A notable highlight of the report was the exceptional performance of Amazon Web Services, the company's cloud business, which contributed significantly to its impressive financial performance. The market responded positively to Amazon's strong performance, reflecting confidence in the company's ability to deliver robust results and capitalize on its cloud services business.


Amazon stock daily chart

The contrasting reactions to the quarterly earnings of tech giants Amazon and Apple highlight the complexities and challenges in the market. While Amazon impressed with its strong performance, concerns about the smartphone market weighed down on Apple's stock despite positive financial results. Investors are carefully analyzing industry trends and company strategies to make well-informed decisions in a rapidly evolving market.

Over the past two weeks, major central banks, including the Fed, ECB, and BoE, have conducted policy meetings, resulting in 25bp rate hikes. In contrast, the BoJ and RBA maintained their policy rates unchanged. The Fed and ECB emphasized a data-dependent approach, while BoE and ECB members expressed patience. The BoJ took a small step towards policy normalization by introducing greater flexibility to its yield curve control.

Amidst these diverse central bank policies and economic indicators, investors are closely monitoring data and policy statements to understand the trajectory of global monetary policies and their potential impacts on the markets.

Gold prices experienced a slight recovery on Monday after significant losses in the previous week. The recent surge in US Treasury yields, driven by concerns over higher interest rates and a US ratings downgrade, had put significant downward pressure on gold prices in recent trading sessions. As market conditions continue to evolve, investors are closely watching developments that could influence gold prices in the future.


XAU/USD H4 chart

Despite a minor rebound on Friday following weaker-than-expected nonfarm payrolls data, gold still ended the week with a 1% decline, marking its worst performance in over a month. Currently, market attention has shifted to the upcoming US consumer price index inflation data scheduled for release on Thursday, which will provide crucial insights into the state of the world's largest economy.

If the inflation data indicates a pickup after the sharp decline in June, it could fuel expectations of additional interest rate hikes from the Federal Reserve. In anticipation of strong inflation readings, gold is expected to continue its retreat, while the dollar is poised to appreciate. The market sentiment suggests that investors are closely monitoring economic indicators and central bank policies, which will influence the trajectory of gold prices and the US dollar in the coming days.