Equities open flat; all eyes on Fed’s Meeting and Earnings Reports - Market Overview

Equities open flat; all eyes on Fed’s Meeting and Earnings Reports - Market Overview

The global stock markets started with hardly any movements in a day whose main attractions will be the meeting of the Federal Reserve, together with major earnings reports

Treasury bond yields continued to fall yesterday, with Tnote reaching 1.24% and the German Bund dropping 2bp to -0.44%, due to an increase in risk aversion that seems more related to China. In this Asian country, losses in the stock markets continued to pile up and even intensified in the last week, as pressure from the Chinese authorities also the economic slowdown dragged them down. These declines are being transmitted to some extent to western stocks.

Elsewhere in the U.S.

The Federal Reserve’s Meeting is the main event of today, although no monetary policy changes are expected. It should be remembered that during the previous meeting on June 16, Fed went from extremely dovish to moderately dovish when targeting its dot plot to two rate hikes in 2023 vs only one discounted at that time by the market. However, Chairman Powell downplayed the dot plot due to its remoteness in a still uncertain context regarding the growth forecasts and primarily due to the lack of pace in job creation. Although inflation continues on its upward path, the Federal Reserve still considers it a transitory phenomenon with no temporal continuity.

Additionally, there is no announcement expected about the start of the reduction in its bond purchase program either. The Central Bank is still waiting to see further progress in the employment figures and the leading indicators economic indicators. Most analysts expect the Fed to announce the withdrawal of bond purchases either at the Jackson Hole meeting on August 26 or even later, at its September 22 meeting. In today's meeting, it is always possible that Mr Powell provides some signal in this regard, which, if it were earlier than expected, could impact the markets.

U.S Stock Markets

The Tech100 technology index continued its upward path, hitting new highs in recent days, although yesterday it suffered a notable decline with falls of over 1%. However, from a technical analysis point of view, the index shows signs of exhaustion of the bullish movement with a bearish divergence on the daily RSI. The earnings published today, the Federal Reserve meeting and the evolution of the stock markets in China will be the keys to take into account for the future performance of this index.

Interfaz de usuario gráfica, GráficoDescripción generada automáticamente

Sources: Bloomberg, reuters.com.

This information/research prepared by Miguel Ruiz (“the research analyst”) does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.

The research provided does not constitute the views of JME Financial Services (Pty)Ltd nor is it an invitation to invest with JME Financial Services (Pty)Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.

As of the date the report is published, the research analyst and his/her spouse and/or relatives who are financially dependent on the research analyst, do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities).

The research analyst in not employed by JME Financial Services (Pty)Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation or particular financial needs before making a commitment to invest.

The laws of the Republic of South Africa shall govern any claim relating to or arising from the contents of the information/ research provided.

JME Financial Services (Pty) Ltd trading as ZA.CAPEX.COM acts as intermediary between the investor and Magnasale Trading Ltd, the counterparty to the contract for difference purchased by the Investor via ZA.CAPEX.COM, authorised & regulated by the Cyprus Securities and Exchange Commission with license number 264/15. Magnasale Trading Ltd is the principal to the CFD purchased by investors