US jobless claims fell to a pre-pandemic low of 348,000 (previously 377,000), indicating a recovery in the labor market. On the one hand, this is very good for the economy and the dollar index. On the other hand, the labor market recovery can influence the Federal Reserve, so it will begin to reduce the QE program, triggering massive sales in the financial markets. The US stock market ended Thursday’s trading without a single dynamic. Index Dow Jones decreased by 0.19%, S&P 500 added 0.13% and NASDAQ added 0.11%. The FOMC minutes indicate that the Federal Reserve may begin cutting the QE program at any time, but analysts tend to think it will happen between September 22, 2021, and January 1, 2022. Investors are likely to be very cautious all this time, so the growth potential of indexes will be limited.
European stock indices closed in the red zone yesterday. The British FTSE 100 decreased by 1.5% (a 3 month low), German DAX decreased by 1.25%, French CAC 40 lost 2.4%. The European Central Bank and the Bank of England are not going to change their monetary policy at the moment. Given Europe’s conservatism, the EU is likely to be the last on the list to tighten monetary policy.
The gold situation remains unchanged. Now it is important to know when the Fed will start cutting the QE program. Reducing the Fed’s debt purchases will raise US government bond yields, which will lead to a sharp drop in gold. But as long as the monetary policy remains unchanged, gold and silver prices will rise.
Oil prices fell to a 3-month minimum. The sharp increase in Delta cases around the world is worsening the outlook for global fuel demand.
The People’s Bank of China (PBOC) kept the loan prime rate (LPR) unchanged. China aims to build modern socialism in the country. At a meeting on financial and economic issues, Chinese President Xi Jinping said that excessive income should be combated and called on citizens and companies with high incomes to give back more to society for the prosperity of all. Amid the news, Hong Kong’s index fell by 2.28% to a low this year, while China’s blue chips decreased by 2.4%. In July, Japan’s consumer price index fell by 0.3% on a year-on-year basis. It didn’t meet the forecasts of economists, who had expected a 0.5% decline. The core consumer price index, which excludes changes in food and fuel prices, fell by 0.2% on a year-on-year basis, beating economists’ expectations. The coronavirus continues to constrain economic activity in most cities across the country. Seven more prefectures are under a state of emergency. Analysts believe the quarantine will hit the already weak household incomes. Japan’s Nikkei index decreased by 0.87% to a seven-month low. Quarantine restrictions in Sydney were extended for another month.
Main market quotes:
- S&P 500 (F) 4,405.80 +5.53 (+0.13%)
- Dow Jones 34,894.12 −66.57 (−0.19%)
- DAX 15,765.81 −200.16 (−1.25%)
- FTSE 100 7,058.86 −110.46 (−1.54%)
- USD Index 93.56 +0.42 (+0.45%)
Important events for today:
- Japan National Core Consumer Price Index (m/m) at 02:30 (GMT+3);
- China PBoC Loan Prime Rate (m/m) at 04:30 (GMT+3);
- UK Retail Sales (m/m) at 09:00 (GMT+3);
- Canada Retail Sales (m/m) at 15:30 (GMT+3).
