Week of Aug 28

Last week was dominated by anticipation for what could come out of the Jackson Hole Symposium, as market data remained relatively light with many traders away for summer break. The week ahead brings back the macroeconomic rush, with flash Eurozone CPI followed by US NFP, the highlights that could shake up the markets.

The Week in Review

The start of the week was somewhat depressed by worries over China's economic outlook, with another round of stimulus from the government failing to reassure investors. Trading was generally light through the week, with traders taking a time out ahead of the Jackson Hole Symposium, in which there was broad anticipation that Fed Chair Jerome Powell might announce that the rate hiking cycle is essentially over. 

WTI was pushed around by a series of factors, including a growing consensus that the US might avoid a hard landing and a series of storms forming in the North Atlantic that didn't deliver any major impact on the industry in the middle of one of the calmest hurricane seasons in recent years. 

Major economy flash PMIs disappointed expectations, with Europe in particular seeing the composite measure fall back into contraction. However, Germany reported its final Q2 GDP figure as flat and coming out of a technical recession. 

Retail earnings in the US disappointed, but the blow-out results from Nvidia helped prop up the Nasdaq through the middle of the week, with AI trade still seen as a driver for some market segments. 

In geopolitics, the BRICS summit was held in South Africa, with notable events, including the President of China skipping a key speech and the organisation extending invitations to Indonesia and Argentina, among others. 

Biggest Market Movers

Cable was among the worst performers for the week after disappointing PMI data combined with a stronger dollar. It fell 1.33% to a June low of $1.2560 before recovering slightly to close the week in red.

Speculation towards the end of the week that the ECB was developing a bias towards not hiking in September weighed on Fiber. Since the peak of July, EUR/USD has fallen for 6 weeks, registering around 4.50% in losses, with a -potentially temporary- low in at $1.0766.

The yen weakened above the ¥146 level as the BOJ remained largely silent ahead of Jackson Hole, and Tokyo inflation fell. Fresh highs are becoming a reality in USD/JPY as the dollar index recorded a 6-week gain.

Metals gold and silver saw increased demand following China’s intervention, with speculation for a short-squeeze on the rise. Gold recaptured $1900/oz after gaming over 1%, whereas silver witnessed an over 6% spike in the week.

Top Events in the Week Ahead

NonFarm Payrolls Back in Focus

The highlight of the coming week will likely be the release of US Non-Farm Payrolls on Friday after last month saw a drop in job creation. That trajectory is expected to have extended, with the consensus expecting 180K jobs created in August compared to the 187K reported in July. 

The prior month is expected to be revised lower, which has been the trend this year. The unemployment rate, on the other hand, is expected to remain steady at 3.5%, with average hourly earnings growing at the same 0.4% reported in July. 

Other important data from the US will be released the day prior, with personal income and core PCE price index expected to remain unchanged from the prior month, making the case for further inflationary pressure. 

Depending on the position of the S&P following a 3% drop to 4350, next levels can be seen around 4450 on the one hand, and 4280 on the other.   

Eurozone Preliminary Inflation Seen Lowering

Flash annual inflation for the month of August from the Euro Zone is expected to drop to 4.9% from 5.3% prior. Still, the markets are likely to anticipate the result from the release of French and German CPI in the lead-up to the data for the shared economy, with both expected to report inflation dropping. The Eurozone unemployment rate is expected to remain unchanged at 6.5%.

EUR/USD has crucial support at $1.0745, which, if lost, additional bets towards $1.07 could be seen. Bulls might see an opportunity after six consecutive weeks of losses, but rising past $1.09 will be unlikely.

China Official PMI Figures

The last day of the month is when China will disclose its official PMI measure, which is expected to get extra attention given the consternation around the housing sector and the actions taken by the government to boost the economy. The consensus is that NBS Manufacturing PMI will remain in contraction with a modest improvement to 49.5 from 49.3 prior, with the Non-Manufacturing segment descending to 51.0 from 51.5 but staying in expansion.

WTI may be affected if China’s data enthuses investors, with $80/bbl holding opening the door to $85/bbl. Conversely, renewed concerns on downbeat PMIs could see the descent continue to fresh July lows, facing bulls near $75/bbl. 

Other Events and Earnings

On Tuesday, GfK will release its consumer confidence figures for Germany, and the Conference Board will do the same for the US. Wednesday has the ADP employment report, which has lost most of its reputation for being able to predict the NFP. Thursday includes German retail sales. Friday sees Canada's GDP. 

Among companies reporting in the week are Heico, HP, NIO, Salesforce, CrowdStrike, Brown Forman, Broadcom, UBS, VMware and Lululemon