Financial Markets Outlook
Previous Week Summary
Volatile August on financial markets is finally over. However, the markets are entering September, which is, statistically, the worst month of the year. Markets enter this month with anticipation of rate cut mid-month by the Federal Reserve. Worries of a shaky global economy that can harm the U.S are also a potential market impact. The S&P finished August with a 2% drop overall, ending August with a significant weekly rise of 2.8%. Dow Jones finished this choppy month with a weekly increase of 3%.
Crude oil was volatile this week. It had three straight days with at least 2% daily increase, something we haven’t seen for quite some time.
The first week of September includes some important financial reports, which may have a serious impact on the market’s volatility.
The Week Ahead on Financial Markets
The latest escalation in a trade war happened on Sunday. China and the United States began imposing additional tariffs on each other’s goods. Despite this fact, U.S. President Donald Trump said the sides would still meet for talks later this month. The latest tariffs that came into effect on Sunday were long due though and may already influence market prices.
Trump continued urging American companies to find alternative suppliers outside China.
The week opens with Labor Day holiday in the U.S. on Monday. In Germany, Manufacturing PMI (Manufacturing Purchasing Managers Index) data will be out to show an indication of overall economic performance. The data might have an immediate impact on EUR against other major currencies performance and on major German indices. Same PMI data will be out in the U.K. as well. Traders will be watching this data closely as purchasing managers have early access to information about their corporations. Thus indicating how the performance of these companies is.
Traders should have plenty of trading opportunities on Tuesday with many economic data publications planned for the day. Retail sales data will be public in Australia. This serves as the most important indicator of consumer spending. Higher than expected results should be positive for the AUD against other major currencies. Later that day, the Reserve Bank of Australia will publish its interest rate decision. This could cause volatility in AUD against other major currencies around the time of announcement. In the U.S., PMI data will be out and higher data should be positive for the USD.
On Wednesday, the GDP (Gross Domestic Product) data will be out in Australia. This serves as an indicator for future rate decisions and helps understand the economy’s health.
Closing the Trading Week
Thursday is a busy trading day. The U.S markets will see the ADP nonfarm employment change data. This serves as an indicator of the governmental report to come in two days. Traders should pay close attention to the volatility, as the change in this indicator can be very volatile. Later that day, crude oil inventories data will be released. The more than expected increase in crude oil inventories indicates weak demand and harms the crude oil prices.
The most critical data for this week will be public on Friday, and it is the unemployment rate. Higher than expected data will have a positive impact on the major U.S. market indices and on the USD.
The upcoming week could continue being volatile mainly because of the continuing tensions between the U.S. and China. Besides, investors’ eyes will be on the upcoming economic data. They will closely seek for other market-moving events aside from the continuing trading tensions between the U.S. and China.