Daily Broad Market Recap – August 5, 2024

Traders appear to have woken up on the wrong side of the bed this Monday, as major asset classes found themselves in the red.

What’s going on?

Here’s a quick summary of the headlines and economic updates that impacted the markets:

headlines:

• Minutes of the Bank of Japan meeting revealed that policymakers were cautious about the impact of the weaker yen on import prices and household spending.
• Australia’s inflation rate rose to 0.4% in July from 0.3% on a monthly basis.
• ANZ Commodity Prices July: -1.7% MoM (+1.5% Previous)
• China Services PMI July: 52.1 (51.4 expected, 51.2 prior)
• The Eurozone’s final services PMI for July stood at 51.9, as expected.
• Eurozone Sentix Investor Confidence Index for August: -13.9 (-5.5 expected, -7.3 previously)
• Eurozone Producer Price Index July: 0.5% MoM (0.1% expected, -0.2% previously)
• FOMC member Goolsbee acknowledged that jobs data was weaker than expected but did not signal a recession.
• The final US services PMI was lowered to 55.0 from 56.0 in July versus expectations of no change.
• US ISM Services PMI July: 51.4 (51.1 expected, 48.8 prior)
• FOMC member Daly indicated that risks to the Fed’s mandate are more balanced, and he is open to cutting interest rates at upcoming meetings.
• CBOE Volatility Index The fear index rose to its highest level of 65 since October 2020.
• The UK BRC Retail Sales Index rose by 0.3% year-on-year in July after a previous decline of 0.5%.
• Average cash income in Japan June: 4.5% y/y (expected 2.5%, revised up from 1.9% to 2.0%)
• Japanese household spending In June: -1.4% y/y (-0.9% expected, -1.8% previously)

Price movement in the broad market:

Financial markets are still reeling in the wake of disappointing US non-farm payrolls data on Friday, as the jobs report prompted investors to worry that a recession could be imminent.

Asian stocks started on a negative note, with Japanese markets posting their worst declines since 1987, followed by similarly sharp declines in European stocks and losses of about 3% for U.S. stock indices.

Commodities such as precious metals and crude oil also found themselves in the red, as the gloomy global growth outlook is likely to weigh heavily on demand. However, some losses were pared in early New York trading, but not enough to push risk assets back into positive territory.

Treasury yields managed to stage a much stronger rebound, getting an additional boost from the US ISM services PMI which returned to expansion territory and eased some recession fears.

Forex Market Behavior: US Dollar vs Major Currencies:

US Dollar Overlay Against Major Currencies Chart by TradingView

While most of the USD pairs started the week in a consolidation mode, USD/JPY and USD/CHF were keen to get the ball rolling to resume their downward trajectory after the NFP data.

The dollar rose against some higher-yielding currencies towards the end of the Asian trading session, although there did not appear to be a clear catalyst for the move other than a general decline in risk appetite.

Another round of sideways price action followed before stronger-than-expected US ISM services PMI led to some gains for the greenback.

Potential catalysts coming up on the economic calendar:

• Reserve Bank of Australia Monetary Policy Decision 4:30 AM GMT
• Reserve Bank of Australia Press Conference 5:30 AM GMT
• Unemployment rate in Switzerland at 5:45 pm GMT
• German Factory Orders at 6:00 PM GMT
• Swiss Retail Sales 6:30 am GMT
• US Trade Balance at 12:30 AM GMT
• Canada Trade Balance at 12:30 AM GMT
• New Zealand employment change data 10:45 PM GMT

The spotlight now shifts to Australia, where the Reserve Bank of Australia is set to announce its monetary policy decision. The central bank will also release its updated economic forecasts in its quarterly monetary policy statement, so watch for any adjustments that could serve as clues to its future policy moves.

Later this week, New Zealand will print quarterly jobs data which could have major implications for the RBNZ’s policy bias as well.