Stock Market Today
Today, investors and traders are picking up the moment from the Asian trading session where everything seemed very pessimistic because of the data released from China. The most recent August trade figures released this morning show how distant we are from our annual GDP goal of 5.5% and how weak domestic demand remains. If today’s statistics indicate, we’ll be fortunate to see half that figure if we are lucky. The goal may have been lowered to an ambition just last month, but it’s farther away than ever following today’s data. Import statistics have been poor for a while, with a 2.3% increase in July compared to a 1% increase in June. A poor 0.3% growth rate in August, significantly below predictions of 1.1%, suggests persistent consumer uncertainty and a lack of demand in China.
With the onset of winter, it is becoming harder to remain upbeat about China’s economic future. There is no hope for a significant economic revival until next year, with 21.5 million people already shut down in Chengdu and new restrictions being imposed in locations like Guiyang, Guizhou province, and Shenzhen.
With respect to the US markets, investors are increasingly becoming more confused with their approach to dealing with US markets. The major US stock indices have given up most of their recent gains, and now traders are pricing in another low for this year for the US stock indices. The main price level for the S&P 500 to watch now is the support of 3,900. As long as the price continues to trade above this mark, we have hope for further price improvement. However, if the price action violates this price point, the path of the least resistance is skewed to the downside, which means lower lows.
The Federal Reserve will release its quarterly overview of economic conditions, known as the Beige Book, on Wednesday. Loretta Mester of Cleveland, Tom Barkin of Richmond, and Lael Brainard of the Federal Reserve Board’s Vice Chair will all make appearances on separate occasions.
The New Prime Minister in the UK is expected to provide much comfort to Brits concerning soaring energy prices and ease their pain triggered by the living cost crisis. The UK’s gilts will likely remain focused as she announces new measures to control energy bills. This is due to the fact that her actions may be able to put a leash on inflation for now, but this will come at a much higher cost as inflation is likely to remain high for a much longer time, and this means that the interest rates are also expected to remain higher.
If there is a currency pair gathering the most attention from investors and traders is USD/JPY. The pair has seen tremendous strength in the past few days, especially in the last two days, and today it has crossed above the 144 price mark for the first time since 1993. The reason that we are seeing this much strength in the USD/JPY is purely because of the difference in two central banks’ policies. The Fed is as hawkish as it can be, and the BOJ still doesn’t seem to be bothered much about inflation or changing its stance on monetary policy.
The other interesting currency pair for today is the USD/CAD, as the BOC will announce its monetary policy decision at 12:30 GMT today. During its last event, the bank brought shock waves to the market when it increased the interest rate by 100 basis points and left the door open for more rate hikes. Traders expect to see another rate hike of 75 basis points today, which means more pressure on wage inflation, which has started to shift higher.
Apple’s product launch
Apple is set to unveil its new iPhone 14, a product that still accounts for 50% of Apple’s revenue. The big question for investors and traders is how many takers there will be, given that everyone is hardly being able to cope with a higher cost of living crisis. Not many are thinking of splashing over $1,000 on new phones when they are worried about their mortgage payment which is moving in one direction only, and their utility bill. We think today’s event will be more focused on Apple’s pricing strategy. Obviously, the company is also facing higher costs, and now the question is if it can keep the cost low for its iPhone and play a much bigger game.
Overall, we believe that only people who are absolutely desperate to upgrade their phone and have been working with the absolute model will be looking to buy new iPhones. There will be very little interest among iPhone users who are on iPhone 13 or above to change their phone as after all the changes that Apple brings in its new iPhones isn’t worth the capital they have to sacrifice.
Oil prices remain volatile even though traders know that OPEC+ is playing an active role in the market. But the devil is always in the detail, and we are experiencing a sell-off in oil prices because traders are increasingly concerned about the lockdowns in China, and oil consumption in China is dropping. In addition, OPEC’s new announcement of reducing their production by 100K was not a big deal as it was only last month when they increased it by 100K, and now they are reducing it by the same amount. So on an overall basis, there has not been much change at all.