SMM News: August 31 to September 4 week financial market summary: the market continued last week at the beginning of the week, the dollar fell, gold rose, global stock markets rose, but then the situation was significantly reversed. Technical buying and economic data "surprise" pushed the dollar bullish counterattack, gold turned down, the market volatility increased, the Golden week amplitude of more than $80. Us stocks also had an "accident" in the last two trading days of the week, led by technology stocks. Coupled with the fact that geo-risks continue to accumulate and the US election is approaching, the whole market is moving in an unpredictable direction.
Foreign exchange markets: the dollar continued its previous decline at the beginning of the week as the Federal Reserve adopted a new inflation target to allow loose monetary policy to continue for a longer period of time to weaken the dollar bulls, with the dollar index as low as 91.75. But on Tuesday, the market began to reverse, better-than-expected U.S. economic data boosted the dollar, and the dollar index began to rebound, climbing all the way to 93.15. On Friday, the dollar index fell back to close at 92.81.
The euro / dollar broke through the key 1.20 mark before it began to fall on Tuesday, but successive gains were seen by some investors as an opportunity to sell high, while the dollar's rally dominated the market. In addition, the rising euro puts the euro zone at risk of export setbacks and deflation, and analysts expect the ECB to intervene verbally at next week's monetary policy meeting. This also puts further pressure on the euro.
Sterling / dollar also fell back this week, approaching its highest level since the end of last year at the beginning of the week, hitting 1.3481 and then falling to a low of 1.3175. It rebounded on Friday, but is still down more than 100 points from its weekly high.
Commodity markets: spot gold hit the $1990 mark first this week, but then "tumbled", hitting as low as $1916.20 an ounce, wobbling more than $80, and closing at $1932.45 an ounce, down more than 2 per cent during the week. COMEX December gold futures closed down 0.2 per cent at $1934.30 an ounce, down 2.1 per cent this week.
Better-than-expected US economic data boosted risk sentiment and depressed safe-haven demand for gold. More importantly, the rebound in the dollar has put a lot of pressure on dollar-denominated gold.
This week, WTI crude oil fell 7.4%, while cloth oil fell 5.3% this week. Both WTI crude oil and cloth oil recorded their biggest weekly decline since June. While global market demand has not yet recovered strongly, OPEC overproduction has increased investors' concerns. Two OPEC producers have said changes in their oil production could affect supply in the coming months, and Russia hopes OPEC + will increase overall supply as soon as possible.
Stock market: us stocks fell sharply in the last two days of the week, led by technology stocks. The s & p 500 is down 1.8% this week, the Nasdaq is down 3.7%, and the Dow is down 2.3% a week. Most analysts believe that this is an expected downward correction since the US stock market, led by technology stocks, has risen month after month. On the other hand, the improvement in US economic data has led investors to expect further fiscal stimulus from the US government to slow, which may dissipate the most important factor that strongly supported the stock market during the epidemic.
Take stock of the important news of the week:
The counterattack of the dollar bulls
Originally, Federal Reserve Chairman Colin Powell announced a major policy shift in his speech at the widely watched annual meeting of the global central bank in Jackson Hole last week, implementing the "inflation average target" to allow inflation to temporarily slightly above the 2% target. The Fed said that prioritizing its employment target over inflation means that the current ultra-loose monetary policy is likely to extend for a longer period of time.
This is undoubtedly bad for the dollar. As a result, the market was almost unanimously bearish on the dollar at the beginning of the week.
At one point, the dollar index continued to extend its decline of as much as 10 per cent since its peak in March. "the dollar is facing upward difficulties," said Gene Frieda, global strategist at (Pimco), a Pacific investment management company. He said unprecedented fiscal support and the Fed's expected looser monetary policy, coupled with a bumpy recovery in the US economy, could put "extreme pressure" on the dollar.
ING noted that the policy introduced by the Fed led to longer periods of low real interest rates, which caused the: (a) dollar to lose its potential upside.; (b) investors turned to other investment opportunities.
TD Securities also said that the Fed's policy on inflation will keep the dollar under pressure. Because of extremely low interest rates in the United States, the dollar is actually almost 10% overvalued against other currencies.
Then the dollar bulls staged a powerful "counter-offensive" drama. At the end of European trading on Tuesday, the market suddenly reversed, the dollar rose sharply, while gold tumbled sharply, falling rapidly from the $1990 mark.
The trend was initially not particularly driven by news, which analysts believe was triggered by important technical levels after months of decline in the dollar.
For some analysts, the dollar's rebound came as no surprise. Speculative short positions have risen to record levels. Analysts point out that the time is ripe for short selling of the dollar. "it's time for the dollar to fluctuate," said Bill Baruch, president of Blue Line Futures.
The latest situation was reinforced by a series of US economic data. The first surprise to the market was that the US ISM manufacturing PMI, recorded 56 in August, the highest level since January 2019. The monthly rate of construction spending in the United States recorded 1% in July, the highest since January this year.
The US ISM manufacturing PMI said: "US manufacturing activity accelerated to a more than one-and-a-half-year high in August as new orders surged but employment still lagged behind, supporting the view that the job market recovery has lost momentum. The data showed that the US ISM manufacturing PMI rose to 56 in August, the highest level since January 2019. However, the continuous improvement in the manufacturing sector has been uneven, and the novel coronavirus epidemic has led to a shift in spending from equipment used in service industries such as restaurants and bars to the purchase of goods such as household appliances. "
The series of data prompted investors to become more confident about the recovery of the US economy, deepening the rise of the dollar and the decline of gold.
Although the ADP employment report released on Thursday performed poorly, it still failed to stop the rebound of the dollar. The report shows that ADP employment in the United States increased by 428000 in August, far lower than the expected increase of 950000, and the previous value was revised to an increase of 212000. After the release of the data, the dollar index fell and spot gold rose in the short term, but the effect was very short-lived, and the market quickly returned to the overall trend before the data-the dollar continued to rebound and gold fell.
A high-profile non-farm report released on Friday showed that the United States added 1.371 million non-farm payrolls in August, and the unemployment rate fell to 8.4%. The main data was better than expected.
The President and Vice President of the United States commented on this. Us President Donald Trump tweeted: "Great employment data!" 1.37 million new jobs were created in August. The unemployment rate fell to 8.4% (wow, much better than expected!) . The speed and depth of breaking through 10% is beyond people's imagination. "
"this is another great day for American jobs and American workers," Vice President Pence told CNBC. Mr Burns added that job growth and single-digit unemployment were "real evidence that the US economy is recovering".
Critics believe that this will be Trump's "ammunition" in this presidential election.
Optimistic economic data sent the dollar up and gold up and down, shaking as much as $30 in five minutes. As a result, the dollar recorded its biggest weekly rise in two and a half months.
Us stocks are "in shock"
Global stock markets rose in the first half of the week. The volatility caused by Japanese Prime Minister Shinzo Abe's announcement of his resignation last week has calmed down. Optimistic economic data released this week also boosted risk sentiment as investors became more confident that the global economy was recovering from the novel coronavirus epidemic.
Us stocks have been particularly spurred by the fall in the dollar and monetary and fiscal policy, with the S & P 500 up 7.2 per cent this month, erasing all gains since novel coronavirus's outbreak and breaking through an all-time high. With massive stimulus from governments and central banks around the world, the global economy has stabilized and financial markets have returned from the brink of collapse in February and March. In addition, the company's quarterly results were not as bad as expected, adding to the optimistic outlook for the market.
Apple shares soared on Wednesday after it was reported that Apple had ordered at least 75 million 5GiPhone from global suppliers, a bullish technology news that followed the surprise created by the ISM manufacturing PMI, giving a strong boost to risk sentiment.
On Thursday, the market reversed again, when the largest technology stock in the United States suddenly plummeted, and Apple shares fell 8% on the day, wiping out more than $150 billion in market capitalization. Amazon, Google parent Alphabet and Microsoft all fell more than 4 per cent.
Many Asian markets also fell. The Nikkei index fell 1.11%, the Hang Seng index fell 1.25%, and the CSI 300 fell 0.97%. The decline in technology stocks also spread to Chinese technology companies, with Alibaba shares down 6.7 per cent and Tencent shares down 3.9 per cent.
European stocks stabilized the next day, non-farm data were better than expected on Friday, and U. S. stocks opened steadily. People breathed a sigh of relief, but then U. S. stocks fell again. The Dow fell 521 points, or 1.9%, after rising more than 200 points earlier in the day. The Nasdaq composite index fell 5% and the s & p 500 index fell 2.9%. On Thursday and Friday, the Nasdaq index fell about 10%.
Some analysts believe the sell-off in u.s. stocks represents a healthy correction that has rebounded sharply from march lows, after the s & p 500 index rose nearly 7% this year.
"it looks more like a profit sell-off. I can tell you, it's still a pretty big profit. " "this is not a shift from the stock market to the bond market, nor is it a 'risk aversion' return," said Robert Carnell, head of Asia-Pacific research at ING.
Many investors worry that monetary and fiscal stimulus will push the stock market to unsustainable levels. Market volatility has been exacerbated by stretched value, the spread of the novel coronavirus epidemic, the absence of a vaccine and the looming US presidential election in November.
Scott Knapp, chief market strategist at CUNA Mutual Group, said: "the market has been overvalued recently, especially in the technology sector, which needs to be corrected to some extent. Just look at the recent irrational rise in the share prices of Tesla and Apple. After both companies announced their spin-offs, the market became overly optimistic, especially for retail investors. "
"while we don't expect another crash, we don't need to hit new highs every day to keep the upward trend alive," Frank Cappelleri, executive director of Instinet, said in a report. The S & P 500 rose 9 out of the 10 days and just recorded its biggest gain in two months. It will certainly take some time to digest. "
But Ron William, a market strategist and founder of, RW Advisory, believes asset prices may be on the brink of a sharp collapse known as the Minsky moment and may retest their lows since March.
William mentioned a number of factors that could contribute to the crash, first of all, the recent market gains have been very small, and most of the gains in U. S. stock prices have been driven by technology giants.
"this is an ongoing story where Technology Street, Wall Street and main Street are all divided," he said. "if we look at the equal weight index of the S & P 500, it barely broke its June peak and has actually been flat since then, so we can see what I call an 'extreme deviation'."
The Minsky moment mentioned by William could cause assets to shrink by "20 per cent, 30 per cent or more", leading to a "retest March low" of the current'V' recovery. The S & P 500 fell to 2237.4 on March 23 and closed at 3580.84 on Wednesday.
Combined with high valuations, negative seasonality in late August and early September, and the upcoming election cycle, the market may be looking for a small correction, William said. He added that this could be healthy in the long run and that there would be a "multi-year repair period" before the long-term bull market returned.
Mr Erian, chief economic adviser to Allianz, said in his market analysis released on September 1st that in the past few weeks, more and more people have expressed "fear of missing out on (FOMO)" through call options rather than directly buying stocks. This limits the level of risk, allows investors to seize the opportunity for a rebound, and protects the portfolio from the "tail risk" of a sharp decline. As a result, the VIX panic index has risen in line with the stock index, strengthening the signal that a larger market correction should be made. Once a massive correction in the market is achieved, it will trigger more selling by professional institutional investors, which could overwhelm retail investors buying on bargains.
Watch out for more accidents.
Geo-risks continue to accumulate this week, requiring investor caution, with China-India relations of particular concern. New clashes broke out between China and India at the border last weekend.
Chinese PLA forces violated the consensus reached between the two countries in military and diplomatic mediation on the evening of the 29th and 30th and carried out provocative military actions to change the status quo, Indian Army spokesman Aman Anand said in a press release on Aug. 31. The Indian army made a pre-emptive strike by taking measures to strengthen India's position on the south bank of Bangong Lake, thwarting China's intention to unilaterally change the facts on the ground. The statement pointed out that the Indian army is committed to maintaining peace and tranquillity through dialogue, but is also determined to protect its territorial integrity.
In response to the Indian allegations, Chinese Foreign Ministry spokesman Zhao Lijian responded at a regular press conference on August 31 that Chinese border guards have always strictly observed the line of actual control and have never crossed the line. The border defense forces of the two countries have always maintained communication on the spot issue.
Senior Colonel Zhang Water Conservancy, spokesman for the western theater of the Chinese people's Liberation Army, said that on August 31, the Indian army undermined the consensus reached at previous multi-level talks between the two sides and illegally crossed the line again in the area south of Bangong Lake and near the Reqin pass in the western section of the Sino-Indian border, blatantly provocative, causing renewed tension on the border.
The Indian army has decided to change its defensive posture from border control to consolidate border defense after a new stand-off between Chinese and Indian troops on the south bank of Bangong Lake, east of Ladakh, the Hindustan Times reported on Friday (September 4).
The Indian army has sent more troops and weapons to the border areas, the Hindustan Times said, citing people familiar with the matter. According to the report, the PLA Air Force has also stepped up its activities in the occupied Aksaiqin area and strengthened its military strength.
India is prepared to continue to use its armed forces to ensure national security, while carefully reviewing China's military reforms and activities to formulate its future strategy, Indian Defense Chief of staff Lavat (Bipin Rawat) said on Thursday.
On Friday, local time, US President Trump (Donald Trump) said the situation between China and India was "very bad" and that the United States was ready to help China and India resolve the border dispute.
Asked about the dispute at a White House news conference, Trump said Washington was discussing with the two countries how to help defuse the situation. "We stand ready to help on China and India," Trump said. If there is anything we can do, we are willing to participate and help. "
Indian Defense Minister Rajnath Singh (Rajnath Singh) urged all points of friction in eastern Ladakh to be restored during talks with his Chinese counterpart in Moscow on Friday, the Hindustan Times reported on Saturday. This is the first high-level face-to-face contact between China and India since the border dispute broke out in Ladakh in early May. Sources said the talks, which lasted nearly two and a half hours, focused on how to resolve the protracted border impasse.
At the same time, the novel coronavirus epidemic is still the focus of the market. The (CDC) of the Centers for Disease Control and Prevention has told public health officials across the United States that they are preparing to distribute a possible coronavirus vaccine as early as the end of October. At one point, the news boosted risk sentiment in the market. But on Thursday, Dr. Fauci (Anthony Fauci), a top infectious disease expert in the United States, said November or December was more likely.
"it's all speculation," he said. "I can imagine getting it in October, but I don't think it's possible."
According to Worldometers real-time statistics, as of 16:31 on September 5, the number of confirmed cases of novel coronavirus in the United States had reached 6389413, accounting for more than 1/4 of the global confirmed cases, and the number of deaths had exceeded 190000, reaching 192132, accounting for nearly 1/4 of the global deaths.
According to the latest forecast by (IHME) of the Institute of Health indicators and Evaluation at the University of Washington, an important forecast shows that as the United States enters the autumn and winter season, the death toll of COVID-19 will exceed 410000 by the end of this year.
Novel coronavirus has killed at least 186800 people in the United States, according to data compiled by Johns Hopkins University. IHME's model predicts that if states continue to relax restrictions on novel coronavirus, the death toll will more than double to 620000 by January 1. The White House and state officials have previously cited IHME's model.
"the worst is yet to come. I don't think it was an accident, although I think there is a natural trend that the epidemic may be disappearing because we are a bit in the summer in the northern hemisphere, "Dr. Christopher Murray, director of the IHME, told reporters on a conference call on Friday.
In addition, with the US presidential election approaching, the political situation in the United States has attracted more and more attention, and investors have become more sensitive to the stimulation of related news.
On Thursday, Facebook (Facebook) said it would stop accepting political ads a week before the US election, and its chief executive Mark Zuckerberg (Mark Zuckerberg) warned of an "increased risk of civil unrest across the country".
Explaining the move, Zuckerberg said: "this election will not take place as usual. All of us have a responsibility to protect our democracy. "
He said he "usually" believes that "the best antidote to bad speech is more, but there may not be enough time to question new ideas in the final days of the election."
To that end, Facebook will "block new political ads in the last week of the campaign". "therefore, we will not accept advertisements for new politics or related events in the week before the election," Zuckerberg said. "
In July, Trump refused to say he would accept the election results, rejecting the validity of opinion polls that showed him lagging behind Democratic candidate Joe Biden (Joe Biden), raising concerns that he and his supporters would not abide by the results.
Trump has reportedly been boycotted by Facebook and Twitter for posting false information related to the postal vote, and this week he encouraged supporters in North Carolina to vote twice in the November election. to make sure their votes are counted.
Next week's market outlook:
The market will continue to pay attention to this focus next week, while whether the major trends of the rebound in the dollar and the decline in US stocks will continue or reverse will also be closely watched.
In the case of gold, sentiment in the gold market is starting to get a little chaotic because prices are still in consolidation, according to the results of the gold weekly survey released by Kitco News on Friday.
In the short term, retail investors are still noticeably bullish on gold; however, the mood of Wall Street analysts has changed. Bearish sentiment among Wall Street analysts prevailed this week after the previous week's bullish mood. However, while short-term sentiment in the gold market has changed, many analysts see the fall in gold prices as a buying opportunity.
This week, 15 Wall Street professionals took part in the latest Kitco survey. Among the participants, four analysts (27%) expected gold prices to rise, nine analysts (40%) said they expected gold prices to fall, and five analysts (33%) were neutral on gold. A total of 1263 votes were received for online ballots for ordinary investors. Of these respondents, 738 (58%) expect gold prices to rise next week. Another 272 (22 per cent) expected prices to fall, while another 253 (20 per cent) were neutral.
Looking ahead to next week, many analysts said they expected gold prices to fall because of the strengthening dollar.
At present, short positions in the dollar are the most crowded trades in the market. It's easy to push these positions higher, "said George Gero, managing director of wealth management at Royal Bank of Canada. However, Gero added that he was still bullish on gold in the near term, as increased market uncertainty could push the price of gold and the dollar in line with each other.
Eugen Weinberg, head of commodities research at Commerzbank, said he had recently taken a neutral view on gold. He also said that while the dollar is a threat in the short term, it is not enough for gold to break through its current support level. "there's a lot to digest in this market," he said. "this period of consolidation is likely to last longer without affecting the overall long-term trend. At the moment, I really don't see anything that can push the price of gold above $2000. But I don't see anything that will cause it to be really less than $1900. "
Next week the market will focus on the European Central Bank, the first of the four major central banks to issue monetary policy decisions in September. With the appreciation of the euro and deflation in the euro zone, analysts expect the ECB to verbally intervene in exchange rates to hint at or implement new stimulus policies, which are expected to bring volatility to financial markets.
Bill Baruch, president of the Blue Line Futures, said: "the ECB must let inflation continue to rise, which means more stimulus measures, which will weaken the euro and push up the dollar."
Economists at Nomura said they did not expect the ECB to act on disappointing inflationary pressures at the moment; however, if they did, it would be through stimulus measures rather than interest rate cuts. "while a 10 basis point cut in interest rates is good for the euro, it will do little good to the current level of inflation."
Eugen Weinberg, head of commodities research at Commerzbank, said it was only a matter of time before he expected more stimulus from the ECB. "perhaps the ECB should do more to boost inflation. Of course they have more room. "
The Bank of Canada will also release its latest interest rate decision next Wednesday. Some economists say it is increasingly likely that the Bank of Canada will follow the Fed in announcing a change in its inflation target.
In addition, Japan and the euro zone will release the final figures of second-quarter GDP next Tuesday, Germany and the United Kingdom will release July trade accounts on Tuesday and Friday respectively, and the United States will release producer price index and consumer price index on Thursday and Friday respectively. At that time, investors will judge the recovery of economies that have been hit hard by the epidemic. Inflation indicators will also indicate follow-up actions by the central bank.
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