✅ Daily Market Analysis - WEDNESDAY AUGUST 16, 2023
Key News:
New Zealand - RBNZ Interest Rate Decision
UK - CPI (YoY) (Jul)
USA - Building Permits (Jul)
USA - Crude Oil Inventories
USA - FOMC Meeting Minutes
In the previous trading session, European markets grappled with a challenging day, witnessing noteworthy declines that drove them to their lowest levels in over a month. This downward trend was predominantly influenced by growing concerns over the Chinese economy and a noticeable slowdown in internal demand.
Likewise, the US markets encountered a similar downturn, feeling the impact of the same prevailing factors.
The major stock indices on Wall Street wrapped up the day with substantial losses, driven by an unexpected surge in retail sales figures that stirred worries about the potential for prolonged periods of heightened interest rates. Concurrently, significant US financial institutions saw their shares decline, prompted by a report hinting at the possibility of credit rating downgrades for select lending establishments by Fitch.
US Retail Sales
As per the latest report from the Commerce Department, retail sales in the previous month exhibited a robust growth of 0.7%, surpassing the projected increase of 0.4%. This data point serves as a testament to the enduring strength of the US economy.
In light of this report, traders maintained their expectation for an imminent pause in Federal Reserve rate hikes, with a notable 89% likelihood. Nevertheless, financial analysts underscored investor concerns that interest rates could potentially remain at their current levels for an extended period, defying initial expectations.
The brunt of the market sell-off was borne by the banking sector, which faced escalated apprehensions surrounding interest rates. The US Treasury yield curve, characterized by long-term bonds yielding less than short-term debt instruments for over a year, continued to exert pressure. This phenomenon curtails the potential profits that banks can generate from their lending activities.
The S&P 500 index marked a significant development as it concluded the trading session below its 50-day moving average for the first time since March.
In a similar vein, the Nasdaq index witnessed a decline of 1.14%, concluding at a value of 13,631.05 points. Simultaneously, the Dow Jones Industrial Average registered a decrease of 1.02%, settling at a value of 34,946.39 points.
NASDAQ indices daily chart
SPX indices daily chart
Trading activity on US exchanges displayed a relatively subdued pattern, with a total of 10.1 billion shares changing hands. This number stands in contrast to the average of 10.9 billion shares traded over the previous 20 trading sessions.
Following the release of a report hinting at potential downgrades by the ratings agency Fitch, several banks encountered declines in their share prices. Specifically, shares of JPMorgan Chase (NYSE: JPM) witnessed a decrease of 2.5%, Bank of America (NYSE: BAC) registered a drop of 3.2%, and Wells Fargo (NYSE: WFC) underwent a decline of 2.3%.
JPM stocks daily chart
BAC stocks daily chart
The British pound experienced a notable upswing in its performance during the preceding day, primarily driven by wages data that exceeded initial projections. This encouraging turn of events has ignited discussions within financial circles regarding the potential scenario of the Bank of England considering another rate hike as early as September.
The freshly unveiled wage data, unveiled just yesterday, showcased a remarkable surge of 7.8% over the course of the three months culminating in June. While this data has introduced a complex conundrum for the central bank, it also holds the potential to trigger substantial economic repercussions if the Bank of England's policy response is not skillfully calibrated to align with the prevailing conditions.
GBP/USD daily chart
In the approaching day, the eagerly awaited Consumer Price Index (CPI) figures for the UK are set to be revealed. This upcoming release takes on added significance as it marks the incorporation of the recently implemented lower energy price cap. Notably, the anticipated August inflation report is expected to reflect a decrease in price growth, thereby contributing to a broader landscape of subdued inflation.
New Zealand - RBNZ Interest Rate Decision
UK - CPI (YoY) (Jul)
USA - Building Permits (Jul)
USA - Crude Oil Inventories
USA - FOMC Meeting Minutes
In the previous trading session, European markets grappled with a challenging day, witnessing noteworthy declines that drove them to their lowest levels in over a month. This downward trend was predominantly influenced by growing concerns over the Chinese economy and a noticeable slowdown in internal demand.
Likewise, the US markets encountered a similar downturn, feeling the impact of the same prevailing factors.
The major stock indices on Wall Street wrapped up the day with substantial losses, driven by an unexpected surge in retail sales figures that stirred worries about the potential for prolonged periods of heightened interest rates. Concurrently, significant US financial institutions saw their shares decline, prompted by a report hinting at the possibility of credit rating downgrades for select lending establishments by Fitch.
As per the latest report from the Commerce Department, retail sales in the previous month exhibited a robust growth of 0.7%, surpassing the projected increase of 0.4%. This data point serves as a testament to the enduring strength of the US economy.
In light of this report, traders maintained their expectation for an imminent pause in Federal Reserve rate hikes, with a notable 89% likelihood. Nevertheless, financial analysts underscored investor concerns that interest rates could potentially remain at their current levels for an extended period, defying initial expectations.
The brunt of the market sell-off was borne by the banking sector, which faced escalated apprehensions surrounding interest rates. The US Treasury yield curve, characterized by long-term bonds yielding less than short-term debt instruments for over a year, continued to exert pressure. This phenomenon curtails the potential profits that banks can generate from their lending activities.
The S&P 500 index marked a significant development as it concluded the trading session below its 50-day moving average for the first time since March.
In a similar vein, the Nasdaq index witnessed a decline of 1.14%, concluding at a value of 13,631.05 points. Simultaneously, the Dow Jones Industrial Average registered a decrease of 1.02%, settling at a value of 34,946.39 points.
Trading activity on US exchanges displayed a relatively subdued pattern, with a total of 10.1 billion shares changing hands. This number stands in contrast to the average of 10.9 billion shares traded over the previous 20 trading sessions.
Following the release of a report hinting at potential downgrades by the ratings agency Fitch, several banks encountered declines in their share prices. Specifically, shares of JPMorgan Chase (NYSE: JPM) witnessed a decrease of 2.5%, Bank of America (NYSE: BAC) registered a drop of 3.2%, and Wells Fargo (NYSE: WFC) underwent a decline of 2.3%.
The British pound experienced a notable upswing in its performance during the preceding day, primarily driven by wages data that exceeded initial projections. This encouraging turn of events has ignited discussions within financial circles regarding the potential scenario of the Bank of England considering another rate hike as early as September.
The freshly unveiled wage data, unveiled just yesterday, showcased a remarkable surge of 7.8% over the course of the three months culminating in June. While this data has introduced a complex conundrum for the central bank, it also holds the potential to trigger substantial economic repercussions if the Bank of England's policy response is not skillfully calibrated to align with the prevailing conditions.
In the approaching day, the eagerly awaited Consumer Price Index (CPI) figures for the UK are set to be revealed. This upcoming release takes on added significance as it marks the incorporation of the recently implemented lower energy price cap. Notably, the anticipated August inflation report is expected to reflect a decrease in price growth, thereby contributing to a broader landscape of subdued inflation.
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