European and US futures are trading down today following the blockbuster performance of the US indices last week. The S&P 500 ended Friday at a record close of 4,468 points, while the Dow closed at 35,515.38 points, posting record highs for the week as well.
Following the release of positive economic reports and strong corporate earnings, market sentiment was generally positive. In July, core inflation grew at a slower rate than expected and jobless claims have been declining for the last three weeks.
The upcoming Fed minutes may give investors more information about how the Fed plans to address the monetary policy issue in the coming months. The central bank is finally considering tightening its ultra-loose monetary policy, which has supported the economy since the coronavirus pandemic began. The minutes could provide investors with more insights into how the Fed is going to tackle the issue in the coming months.
Investors will also be focusing on the upcoming retail sales and industrial production numbers that are scheduled to be released on Tuesday. Retail sales in the United States are expected to fall in July. The main cause of the lag is most likely the weakness seen in auto sales, which has been hampered by supply chain bottlenecks, resulting in lower dealership inventories. On the other hand, industrial production in the U.S. is likely to rise in July. Stock traders should understand that the manufacturing sector has been facing a boost in demand for its products while working with an unreliable supply of labour and materials.
Consumer Confidence Data
The University of Michigan’s consumer confidence data, released on Friday, painted a bleak outlook for personal finances, inflation, and economic recovery. The index fell 13.5%, settling near the lows seen at the start of the coronavirus pandemic in April 2020. Such a sharp decline has only occurred once before, during the 2008 global financial crisis. As a result, the 10-year US government bond’s price jumped while its yield fell 0.07%, settling at 1.29%.
However, stock traders should understand that the drop in consumer confidence is primarily an emotional reaction on the part of consumers. Investors expected the pandemic to be over, but the uptick in Delta cases proved otherwise. However, thanks to an effective vaccination programme, 50.7% of Americans have already been fully vaccinated, making the reintroduction of strict controls very unlikely, and thus investors should expect the economy to grow at a rapid pace in the short term.
Last week was extremely bullish for cryptocurrencies, which finally surpassed the $2 trillion mark, as Bitcoin, the king of cryptocurrencies, and coins such as Cardano, Dogecoin, and XRP continued to rise. Bitcoin has been trading above its 200-day moving average and has reached a high of $48,152.
The improvement in momentum came after crypto enthusiasts were unable to persuade Washington to change tax regulations affecting digital coins in the infrastructure bill, which was passed by the Senate on Tuesday. The language used makes the crypto sector vulnerable to broad oversight. Surprisingly, however, cryptocurrency prices have proved to be extremely resilient to the news, and investors interpreted this as an exceptionally bullish signal. The mere acknowledgement of the blockchain space by lawmakers was interpreted as a legitimising event indicating that cryptoassets are here to stay.
Oil prices have fallen as a result of an increase in coronavirus cases caused by the Delta variant. Prices have fallen for the last two days. According to the International Energy Agency, the growth in demand for crude oil has slowed dramatically as governments around the world have been forced to restrict free movement. In response to the changing dynamics, Goldman Sachs has reduced its short-term forecast for the global oil deficit from 2.3 million barrels per day to 1 million barrels per day. Having said that, investors should keep in mind that OPEC has maintained its forecast that oil demand will ramp up this year and in 2022.
A retracement in the dollar index encouraged investors to invest in gold, which led to a nearly 1% rise in prices on Friday. Added physical demand for gold, primarily from India and China, also supported falling gold prices. However, investors should note that augmented demand for gold was mainly driven by technicals and that this surge would likely be temporary as the Fed is expected to start tapering off its stimulus in a couple of months. Gold is currently trading at nearly $1,777 per ounce as of 12:27 a.m. EST.