✅ Daily Market Analysis - THURSDAY SEPTEMBER 07, 2023

Key events:

USA - Initial Jobless Claims
USA - Crude Oil Inventories

On Wednesday, global stock indices experienced a downturn, while the benchmark US Treasury yield surged, and the US dollar reached its highest point in six months. This surge was driven by strong data from the US services sector, indicating that inflationary pressures continue to be a concern.

The impact of these developments was notably significant on Wall Street, where shares of tech behemoth Apple (NASDAQ: AAPL) took a hit, falling by 3.6%. The Wall Street Journal reported that China had issued a ban on officials working at central government agencies from using iPhones and other foreign-branded devices for official purposes.

Apple stock daily chart

The Institute for Supply Management (ISM) has reported an increase in its non-manufacturing Purchasing Managers' Index (PMI) for August. This uptick suggests that new orders are strengthening, and businesses are experiencing higher input costs. Some investors have taken this data as an indication that interest rates could remain elevated for an extended period. However, the general consensus is that the US Federal Reserve will maintain its current pause on rate hikes during its upcoming meeting later this month.

Adding to the discussion, Fed Bank of Boston President Susan Collins has stressed the importance of exercising caution in the central bank's future monetary policy decisions, despite signs of progress in controlling inflation.

These developments had repercussions in the stock market, with the Dow Jones Industrial Average experiencing a decline of 198.78 points, equivalent to 0.57%, closing at 34,443.19. Similarly, the S&P 500 saw a loss of 31.35 points, or 0.70%, finishing at 4,465.48, while the Nasdaq Composite dropped by 148.48 points, a 1.06% decrease, to conclude the day at 13,872.47.

NASDAQ Index daily chart

SPX Index daily chart

Today, European stock markets are poised to open with losses, driven by fresh signals of slowing growth in both Europe and China. Moreover, concerns about potential tightening measures by the Federal Reserve are further dampening market sentiment.

In Germany, DAX futures have declined by 0.3%, while CAC 40 futures in France have also slipped by 0.3%. Meanwhile, the FTSE 100 futures contract in the UK is down by 0.2%. Earlier economic data revealed a 0.8% month-on-month drop in German industrial production for July, surpassing expectations of a 0.5% decline. This latest data point adds to a string of reports indicating that the largest economy in the eurozone is facing significant challenges and might be at risk of slipping back into recession.

DAX index daily chart

CAC 40 index daily chart

FTSE 100 index daily chart

In addition to the European economic concerns, China's trade data for August painted a challenging picture. Exports in China dropped by 8.8% year-on-year, while imports fell by 7.3%. While these figures exceeded expectations, they highlight the continued strain on China's manufacturing sector, emphasizing the urgency for policymakers to focus on stimulating domestic demand to support economic growth. China's economic performance carries significant weight for Europe's largest companies, and its ongoing challenges have a ripple effect on their financial results.

Shifting our attention to the Bank of Canada (BoC), the central bank recently made a decision in line with expectations by keeping its policy rates unchanged during its interim meeting. While the BoC did acknowledge a reduction in excess demand, it left the door open for potential future rate hikes. The central bank expressed concerns about the persistent pressure on underlying inflation. In summary, the BoC's communication leaned towards a more hawkish stance, pointing out the absence of recent downward momentum in underlying inflation and emphasizing the risk that elevated inflation could become entrenched.

XAU/USD H8 chart

On Thursday, gold prices held steady, although they faced some downward pressure due to the strength of the US dollar and Treasury yields.

The dollar index reached a fresh six-month high, touching 105.03, and was last seen trading at 104.85, reflecting a 0.1% increase. Meanwhile, the euro experienced slight gains, edging up by 0.03% to reach $1.0723.

DXY H8 chart

In contrast, oil prices took a different turn, reversing their earlier declines and ending the day with gains. This shift was primarily fueled by trader expectations of forthcoming reductions in US crude oil inventory.

Brent crude futures settled at $90.60 per barrel, registering a rise of 56 cents, while US crude futures closed at $87.54, marking an increase of 85 cents.

Looking ahead, one of the most significant data releases for today is the euro area wage figures, particularly compensation per employee for the second quarter of 2023. This specific wage measure is closely monitored by the European Central Bank (ECB), and its release holds substantial importance as it serves as the final significant data point before the upcoming ECB monetary policy meeting scheduled for next Thursday.