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03 Aug

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Welcome, August

Posted by RVR Ventures In Analysis 0 comment

While stocks ended slightly higher for the day, week and month on Friday, on strong Technology earnings and US GDP that was less negative than expected, signs the economic rebound is stalling will likely make any further equity gains an uphill battle during the coming month.

Friday’s late session rally was sparked by a report the adminstration and Congressional Democrats planned to meet Saturday to strike a deal on the next coronavirus aid package. Markets await breakthrough on US virus relief bill, exceptionally volatile month ahead signalled, equities continue to diverge from the VIX, yields and gold and other important events for the week ahead.

Below are thumbnail sketches of the events and data that shape the macro picture.

Country

US lawmakers continue to debate over the distribution of funds for another coronavirus stimulus package as the $600/week provision from the $2.2 trillion CARES Act bill expired. With millions still unemployed, lawmakers are now feeling the heat from their constituents who have suffered a sharp drop in their monthly budget.

The politically-sensitive British Pound continues to remain suspended in an ethereal fog of ambiguity as policymakers scramble to make progress ahead of the December 31 Brexit deadline. The UK and EU have scheduled trade negotiations all the way until October 2. Brussels has made it clear that London has to present an agreeable deal by October so the 27 European leaders have enough time to ratify it.
The UK’s chief Brexit negotiator David Frost said that “negotiating rounds will take place in August and in September, unless agreed otherwise between the parties” ahead of an EU summit from October 15-16. Many issues continue to hinder the timely adoption of a resolution. As the deadline draws near, British Pound crosses will likely become more sensitive and prone to volatility.

Eurozone

The Euro may endure the brunt of the European Union’s policy stance on digital sovereignty as the bloc risks angering China and the United States, resulting in fighting a digital war on two fronts. The latter last year expressed discontent over France’s attempt to implement a digital tax that subsequently led to threats of tariffs against goods ranging from porcelain to luxury handbags. The Euro subsequently suffered with local stocks.
The EU has also experienced frequent run-ins with technology giants like Google, Apple, Facebook and Amazon – shorthanded as GAFA – that have damaged cross-Atlantic relations. Consequently, the EU’s turn inward in this regard threatens to further widen the rift between the two allies at a time when inter-regional cooperation is needed most amid the worst economic recession in a century.
This comes after the earlier Reuters report that the Frugal Four are ready to accept EUR390 billion in grants and EUR360 billion in loans.

China

The People’s Bank of China (PBOC) has set the yuan reference rate at 6.9980 versus Friday’s fix at 6.9848.

Australia

Austrian Chancellor Sebastian Kurz and Dutch Prime Minister Mark Rutte expressed their content over the current compromise proposals.
Melbourne, which had been named the “world’s most livable city” for seven straight years before being beaten out by Vienna in 2018, won’t be feeling quite so livable for the next six weeks. Australia’s second-biggest city faces strict lockdown measures as the state of Victoria saw another record spike in coronavirus cases — 671 in a single day.

Japan

The manufacturing sector in Japan continued to contract in July, albeit at a slower rate, the latest survey from Jibun Bank showed on Monday with a manufacturing PMI score of 45.2.
That’s up from 40.1 in June, although it remains beneath the boom-or-bust line of 50 that separates expansion from contraction.
Individually, the downturn in output eased sharply in comparison to the second quarter months of 2020.
New orders declined at the smallest extent in five months, while business expectations continued to rebound from April’s low point.

Market

Oil

Oil prices rose on Friday and were on track for monthly gains, benefiting from news that U.S. oil output cuts in May were the largest on record.
Brent crude LCOc1 settled up 37 cents, or 0.9%, at $43.31 a barrel.
crude CLc1 was up 35 cents, or 0.9%, at $40.27 after dropping 3.3% in the previous session, also off lows not seen since July 10.
Brent crude posted a fourth month of gains and U.S. crude posted a third as both rise from depths hit in April, when much of the world was in lockdown due to the coronavirus pandemic.

Gold

Gold has taken another step toward $2,000 while the dollar is looking for a direction after recovering some of July’s losses on Friday. August kicks off with the first hint toward the Non-Farm Payrolls, uncertainty about fiscal stimulus, tense Sino-American relations, and more.

Here’s a look at all the important market-moving factors for the week:

Week Ahead

All times listed are EDT

Monday

3:55: Germany – Manufacturing PMI: seen to climb to 50.0, minimum expansion territory, from the contractionary 45.2 level.

4:30: UK – Manufacturing PMI: probably advanced to 53.6, extending expansion from the from 50.1 level.

10:00: US – ISM Manufacturing PMI: likely rose to 53.6 from 52.6.

21:30: Australia – Retail Sales: anticipated to have plunged to 2.4% from 16.9%.

Tuesday

00:30: Australia – RBA Interest Rate Decision: predicted to remain at 0.25%.

18:45: New Zealand – Employment Change: expected to have dropped to -1.9% in Q2, from 0.7%.

Wednesday

4:30: UK – Services PMI: seen to have jumped to 56.6 from 47.1.

8:15: US – ADP Nonfarm Employment Change: forecast to drop to 1,500K from 2,369K.

10:00: US – ISM Non-Manufacturing PMI: anticipated to have edged down to 55.0 from 57.1.

10:30: US – Crude Oil Inventories: likely to have jumped to 0.375M from -10.612M.

Thursday

2:00: UK – BoE Inflation Report, MPC Meeting Minutes, Interest Rate Decision: predicted to stay at 0.10%.

4:30: UK – Construction PMI: seen to climb to 57.0 from 55.3.

8:30: US – Initial Jobless Claims: printed last week at 1,434K.

Friday

8:30: US – Nonfarm Payrolls: expected to plummet to 1,518K from 4,767K.

8:30: Canada – Employment Change: anticipated to more than halve to 415.0K from 952.9K

10:00: Canada – Ivey PMI: last month’s reading was 58.2.

Based on the above factors and the events lined up for the week, the analyst at RvR Ventures suggests you to Trade responsibly; invest only as much as you can lose. All the profits and losses due to the above data are your own personal responsibility. Kindly practice money management & risk mitigation while trading.