Contents
Welcome to the weekly market Financial Market Insights. Here we dive into the world of finance to provide you with a comprehensive overview of the latest developments. In this edition, we’ll discuss key events from the financial markets. Including the US employment report, and the Personal Consumption Expenditures (PCE) price index. In addition to, what to expect in the week ahead. So, let’s get started!
US Employment Report on Financial Market Insights
The highlight of last week was the US employment report. According to the Bureau of Labor Statistics (BLS), the headline non-farm payroll release exceeded expectations. The coming in at 187,000 jobs added in August, compared to the market consensus of 170,000. However, it’s worth noting that this marked the third consecutive month with NFP numbers below 200,000. The report highlighted employment growth in healthcare, leisure, hospitality, social assistance, and construction, while transportation and warehousing saw a decline.
What surprised the Financial Market Insights was the US unemployment rate. This jumped to 3.8%, its highest level since January 2022. This surpasses the expected 3.5%. The unexpected rise in unemployment added strength to the idea of a “Goldilocks” economy. Where the economy avoids a recession, and inflation remains stable. On a month-over-month (MoM) and year-over-year (YoY) basis, wage growth also slowed down. With wages growing only 0.2% in August and 4.3% in the twelve months leading to August.
The aftermath of the release sent US yields lower. This caused the US Dollar Index to drop to 103.27. Thus, lifted US equity futures initially as investors hoped for a pause in the Fed’s interest rate hikes. However, this optimism was short-lived, as US equity benchmarks eventually pared their gains, and the US dollar and yields rebounded. This employment report signified a weaker job market. Therefore, with more Americans unemployed and those employed earning less, this could potentially impact economic growth and consumer spending.
Personal Consumption Expenditures (PCE) Price Index
In addition to the employment report, we also had the release of the Personal Consumption Expenditures (PCE) price index earlier in the week. The PCE index, considered the preferred measure for the Fed, showed a moderate increase in July. The headline PCE price index rose 3.3% YoY, up from 3.0% in June, while the core PCE price index, excluding food and energy, rose 4.2% for the same period, up from 4.1% in June. MoM, both the headline and core PCE releases aligned with market consensus, increasing by 0.2%.
Overall, the PCE Financial Market Insights was neither too hot nor too cold, with the core PCE trend remaining on a downward trajectory. Combined with the lukewarm jobs data from Friday, this reinforces the likelihood of the Fed maintaining interest rates at this month’s meeting, with the probability of a rate hold or increase at November’s meeting evenly balanced, as per the rates markets.
This Week’s Outlook
Looking ahead to the coming week, here are some key events to watch:
Labor Day and Central Bank Decisions
Monday is expected to be a quiet day in the financial markets as US banks remain closed in observance of Labor Day. However, the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC) will be in the spotlight in the first half of the week. Both central banks are anticipated to keep interest rates unchanged at 4.1% and 5.0%, respectively. The AUD/USD has seen a decline of -5.4% year-to-date, while the USD/CAD has experienced a marginal increase. Given the BoC’s history of rate hikes and cooling economic growth, it is unlikely to make any rate adjustments this month.
US Economic Data
In the US, the key economic event to watch is the ISM Services Index, which is expected to dip slightly to 52.5 from the previous month’s reading of 52.7. However, this data is unlikely to alter the market’s expectations regarding the Fed’s September meeting, especially after the softer-than-expected US S&P Global PMIs in August.
The manufacturing sector in the US remains in contractionary territory, with a reading of 47.0 in August, down from 49.0 in July. On the services side, activity slowed to 51.0, its slowest pace since the beginning of the year. Despite an increase in manufacturing data in August, the overall trend remains below the 50.00 threshold, indicating ongoing challenges.
Technical Perspective: Financial Market Insights
Let’s take a closer look at the technical perspective of some key markets:
US Dollar (USD)
The US Dollar Index showed a modest gain of +0.1% last week and recorded its seventh consecutive week in positive territory. On a monthly basis, the Dollar Index concluded with a +1.7% gain, snapping a two-month losing streak. The long-term trend remains upward, with support levels observed on both monthly and daily timeframes.
S&P 500
The S&P 500 finished -1.8% lower in August but remains technically bullish. It closed near the upper end of the previous month’s range, indicating continued buyer interest. Resistance at 4,595 is a level to watch, as a breakout above it could open the door to new all-time highs.
Apple (AAPL)
AAPL rebounded from key support at $174.03 in August, signaling potential for further upside. The formation of an inverted head and shoulders pattern suggests a target price of $191.24, with breakout buyers eyeing the all-time high of $198.23.
WTI Oil
WTI oil recorded a substantial gain of +7.5% in the past week, its largest one-week gain since Q1 2023. While the weekly chart suggests potential resistance at $85.20, the daily chart’s Golden Cross and RSI indicators indicate bullish momentum. However, traders should be cautious of potential resistance at $86.36 and $88.80.
BTC/USD
Bitcoin experienced a pullback from weekly resistance at $30,644 and tested support at $25,381. The weekly support level remains crucial, with potential downside risk. Daily resistance at $27,221 and daily support at $24,262 should also be monitored closely.
Conclusion
In summary, last week’s US employment report and PCE price index data provided insights into the current state of the US economy. While the employment report showed mixed results, the PCE data indicated moderate inflation. Looking ahead, central bank decisions and economic data releases will continue to influence Financial Market Insights sentiment. Additionally, technical analysis suggests potential opportunities in various key markets, including the US Dollar, S&P 500, Apple, WTI Oil, and Bitcoin.
As always, it’s important for investors and traders to stay informed and adapt to changing market conditions. Keep an eye on upcoming events and technical levels to make informed decisions in the ever-evolving world of finance.
