The US stock market rally is about to continue on Monday, judging by the bullishness seen in the futures market. Dow and S&P 500 futures are up about 0.50% while NASDAQ futures have gained almost 0.80% so far. Investors are all in amid the Fed’s dovishness.
For the American stock market, August has been the best month in about 30 years, with the S&P 500 raising by over 7%, Dow adding over 8%, and NASDAQ gaining almost 9%.
When the US stock indices nosedived in mid-March, some economists argued that the market hadn’t bottomed out yet. Nevertheless, the Fed’s unlimited quantitative easing has done the trick so far, and equities have mostly rallied since then. It remains to be seen the long-term effect on the purchasing power of fiat currencies. The Fed continues to push share prices by pledging to maintain interest rates close to zero for a long time.
Starting from Monday, the Dow Jones index is looking slightly different, as it tracks three new companies, including Amgen, Honeywell, and Salesforce. These are replacing Pfizer, Exxon, and Raytheon Technologies. Also, Apple’s 4-for-1 stock split is taking effect today, so the company will have a much smaller weight in Dow’s 30-stock average.
In Asia, equities are also bullish on Monday, hitting a 29-month high. One of the main drivers was the unexpected recovery in China’s service sector. The country’s non-manufacturing PMI increased to 55.2 in August from 54.2 in July. Investors are relieved to see that the world’s second-biggest economy keeps recovering from the impact of the coronavirus pandemic. At the time of writing, Shanghai Composite is up 0.64%, and the Shenzhen Component has gained 0.62%.
Elsewhere, Hong Kong’s Hang Seng is up 0.94%. The index has retreated in the last few hours after an aggressive start.
Japan’s Nikkei 225 has surged 1.42%. The index fell last Friday after Prime Minister Shinzo Abe’s resignation caused uncertainty over the next fiscal and monetary stimulus moves. Nevertheless, Japanese equities have recovered on the news that Chief Cabinet Secretary Yoshihide Suga, who is a close ally of Abe, intends to join the race for the position. Nikkei’s rally is also driven by the news that Warren Buffett’s Berkshire Hathaway had acquired more than 5% stakes in each of the 5 major Japanese trading firms, including Itochu, Marubeni, Mitsubishi, Mitsui & Co., and Sumitomo.
South Korea’s KOSPI has tumbled 0.94% after initial gains, dragged down by disappointing factory data for July, which fell short of expectations.
In Australia, the ASX 200 is down 0.11% after starting on an upbeat note. The Victoria state saw a record 44 deaths caused by the new coronavirus on Monday.
In the commodity market, oil prices are cautiously up despite the fears of oversupply. Currently, WTI is up 0.24%, and Brent has gained 0.46%, driven by global stimulus measures and China’s recovery in the service sector. The weak US dollar also bodes well for oil prices.
The dovish Fed and the weak USD are also pushing gold prices up. The cost of the metal has increased by 0.11% for the day so far, to $1,977 per ounce. Elsewhere, silver has surged 1.70%.
In FX, the US dollar is set to conclude the worst month in about five years, as the sentiment is still dominated by Fed chief Jerome Powell’s speech of last Thursday. The central bank’s new approach to inflation, whose target is at 2%, suggests that the interest rate will be maintained close to zero for a longer period. EUR/USD is moving sideways, but the USD Index is down 0.07%. Investors are waiting for the speeches from other Fed officials, including Vice Chairman Richard Clarida and Atlanta Fed President Raphael Bostic, who will speak later today.
GBP/USD is slightly down, currently trading at 1.3348. Markets in Britain are closed for the Bank Holiday.
