✅ Daily Market Analysis - FRIDAY AUGUST 11, 2023

Key News:

UK - GDP (YoY) (Q2)
UK - GDP (MoM) (Jun)
UK - GDP (QoQ) (Q2)
USA - PPI (MoM) (Jul)

Thursday witnessed the Dow Jones Industrial Average wrapping up with a positive note, propelled by a robust surge in Disney shares, which effectively recouped a significant portion of its earlier declines. This commendable recovery unfolded against the backdrop of mounting Treasury yields, casting a nuanced shadow over the prevailing market sentiment. Concurrently, this unfolding narrative harmonized with the unveiling of data that hint at further indications of subsiding inflationary pressures.

With an admirable stride, the Dow Jones Industrial Average managed to secure a 0.2% uptick, translating to a noteworthy 52-point surge. The broader market displayed a mixed performance, as the S&P 500 maintained a state of relative equilibrium, whereas the Nasdaq experienced a modest uptick of 0.1%, illustrating the market's evolving rhythm.

NASDAQ Indices daily chart

SPX500 Indices daily chart

European Markets Extend Winning Streak with China's Travel Group Announcement

European markets maintained their stride for the second consecutive day, fueled by an additional surge following China's pivotal announcement to revoke its prohibition on overseas travel groups. This significant decision reverberated throughout sectors like travel, leisure, and luxury, infusing them with newfound vitality and propelling growth.

Aided by this promising development, the market's upward trajectory was further reinforced by a noteworthy development across the Atlantic. The US Consumer Price Index (CPI) exhibited an increase of 3.2%, managing to fall below the earlier set expectations. Additionally, core prices exhibited a retreat to 4.7%, evoking speculation that the Federal Reserve's ongoing cycle of interest rate hikes might have culminated, casting a ray of optimism over market sentiment.

US Consumer Price Index

The journey of the consumer price index has been a gradual one, inching towards a more palatable range that aligns with the Federal Reserve's objectives. This trajectory is poised to fortify the central bank's resolve in maintaining its ongoing pause in interest rate adjustments.

While Treasury yields initially wavered, the market landscape shifted as a more intricate dissection of the inflation report revealed a noteworthy uptick in core services ex-housing inflation. This particular metric, held under vigilant scrutiny by the Federal Reserve, witnessed a 0.2% increase, dispelling the stagnant performance witnessed in the preceding month of June.

In a separate development, Walt Disney (NYSE: DIS) emerged on the scene with a strategic announcement to raise the price of its ad-free streaming tier come October. This revelation ignited a spark of investor enthusiasm, fueled by the prospect of potential margin expansion. The move managed to allay concerns surrounding streaming vulnerabilities, effectively casting a positive light on Disney's financial landscape. Intriguingly, this declaration followed closely on the heels of Disney's Q3 revenue report, which, despite falling short of Wall Street predictions, did not dampen investor sentiment. In fact, the announcement catalyzed a remarkable surge of over 4% in Disney's share price, showcasing the responsiveness of the market to well-calibrated strategic maneuvers.

Walt Disney Company stock daily chart

The Disney+ subscriber base faced a dip, tallying at 146.1 million, falling short of the earlier projected estimate of 151.1 million. This unanticipated decline was primarily ascribed to a notable 24% reduction in Disney+ Hotstar subscribers, signaling a challenge in this specific segment.

Alibaba Beats Expectations with Strong Fiscal Q1 Performance

On the other side of the market spectrum, Alibaba (NYSE: BABA), the influential e-commerce juggernaut hailing from China, delivered a compelling financial report for fiscal Q1. The highlight of this report was the surpassing of expectations in adjusted core income. This impressive feat was underpinned by the robust surge in consumer expenditure, notably witnessed during a significant shopping extravaganza that unfolded across China in the month of June. This performance spotlighted Alibaba's dexterity in harnessing consumer behavior to drive its financial prowess.

Alibaba stock daily chart

In a strategic move, Alibaba, a major player in the tech arena, unveiled plans to embark on a company-wide division into six distinct businesses. This tactical maneuver is set to commence from the quarter culminating on June 30, reflecting the organization's commitment to refining its operational structure for enhanced efficiency and agility.

Meanwhile, Alibaba's cloud division experienced a notable upswing, with revenues ascending to 25.12 billion yuan. This surge was fueled in part by the soaring demand for the company's artificial intelligence computing products, a trend that underscores the escalating allure of cutting-edge technologies in today's tech landscape.

European Central Bank's Interest Rate Dilemma Amid Inflation and Economic Data

Amidst a backdrop of varying economic indicators, a majority of economists surveyed by Reuters anticipate that the European Central Bank (ECB) will pause its campaign of consecutive interest rate hikes, a journey spanning over a year, come September. Yet, lingering concerns about persistently high inflation leave the door slightly ajar for a potential rate hike before the year concludes.

Following a sequence of nine consecutive rate hikes since July 2022, ECB President Christine Lagarde laid the groundwork for a potential halt. After a 25 basis point uptick last month, she remarked during a press conference that the need for further increases might be dwindling, stating, "Do we have more ground to cover? At this point in time I wouldn't say so."

Compounded by signs of economic deceleration, most notably in Germany, the dominant economy within the 20-nation bloc, Lagarde underscored the significance of forthcoming data in shaping the ECB's forthcoming decisions. As September looms, the outcome—whether it marks a temporary hiatus or another rate hike—remains uncertain but profoundly influential, encapsulated by Lagarde as a "decisive maybe".

Gold Prices Steady Amidst Mixed US Inflation Indicators

In the realm of commodities, gold prices have found a stabilizing ground near their one-month nadir. Recent inflation data painted a mixed picture, inciting significant market turbulence in stocks and other risk-centric assets. This oscillation propelled a notable shift of investors toward the safety of the dollar, relegating gold's safe-haven status to the sidelines for the time being.

XAU/USD daily chart

The recent inflation data from Thursday, while not wielding a substantial impact on the anticipated course of the Federal Reserve's rate policy in September, has instigated a rising tide of skepticism within the market concerning the possibility of rate cuts by the central bank later this year. This growing sentiment casts a shadow over the prospects of gold, projecting a somewhat muted trajectory.

The realm of precious metals, encompassing both the prices of bullion and the broader metal markets, found themselves ensnared in the grip of a resurgent dollar. The dollar's resurgence was inextricably linked to the tumultuous winds sweeping through the bond market and the cloud of uncertainty enveloping interest rate fluctuations. This tempest of doubt prompted a significant redirection of funds toward the dollar, creating a ripple effect that reverberated across the market landscape.