Please see this week’s market overview from eToro’s global analyst team, which includes the latest market data and the house investment view.
Wall Street rebounded sharply after the brutal sell-off on August 5th. Last week, the Nasdaq gained 5.4%, the S&P 500 rose by 4%, and the Dow Jones increased by 3%, marking the best week since October 2023. This rebound was fueled by encouraging macroeconomic data, including a surprising 1% increase in retail sales in July. Such a strong reading may have triggered inflation concerns in the past, but right now good news is seen as good news. While recession fears have eased, gold’s new all-time high above $2,500 (see also chart) serves as a reminder that those concerns haven’t disappeared entirely. The annual gathering of central bankers, economists, and U.S. government officials in Jackson Hole from August 22 to 24 comes at a crucial time, offering markets valuable insights into what to expect from policymakers for the remainder of 2024. Powell’s speech on Aug 23rd will be closely watched.
In Europe, signs of a soft landing are emerging. Data released on August 14th showed that the EU’s economy grew by 0.3% quarter-on-quarter, helping to lift the EUR/USD exchange rate back above 1.10. Looking ahead, attention is focused on challenging budget discussions in Germany, where exports recently fell by 4.4%, as well as on the ‘excessive’ deficits in France and Italy that could prompt EU intervention. Meanwhile, China has escalated its dispute over higher EV tariffs to the WTO for resolution.
China continues to grapple with the fallout from its property crisis. Average housing prices have declined further, and retail sales grew by just 2.7%, reflecting the country’s ongoing economic slump. Combined with persistent geopolitical tensions, this downturn has not only reduced foreign investment in China but even turned it negative in July.
Jackson Hole: will Powell signal a jumbo rate cut of 50 basis points?
The annual central bank meeting in Jackson Hole begins on Friday. During his keynote address, Jay Powell will not take questions, unlike in press conferences. Historically, these speeches have sometimes hinted at significant changes in monetary policy. Powell is expected to highlight the success of inflation control and prepare the markets for a potential rate cut in September. While there has been increasing speculation about a 50-basis-point cut, the July CPI data, which largely met expectations, does not currently support such a large adjustment. The actual size of the rate cut will likely depend on the August labor market data, which is due to be released in two weeks.
Democratic National Convention: A Key Event in the Tight Election Campaign
The upcoming Democratic National Convention, taking place from August 19th to 22nd, is bringing the 2024 U.S. elections back into focus for the markets. The race between Donald Trump and Kamala Harris is shaping up to be much tighter than Trump’s previous contest with Biden. Harris hopes to leverage her new economic plan as a decisive tool to block Trump’s re-election.
However, political uncertainty remains high, which could increase short-term demand for security among investors. Gold is on track for its best year since 2020, reflecting this uncertainty. Ultimately, the election is likely to remain tense until the end, with just a few swing states determining the outcome. Investors are closely watching election-related trading on Polymarkets for clues about the potential outcome.
What to expect from NVIDIA earnings?
Market expectations are sky-high for NVIDIA’s quarterly earnings, set to be released on August 28th, unofficially marking the end of the Q2 earnings season. Sales are expected to be robust, with other “Magnificent 7” companies continuing to invest heavily in AI without scaling back. A key focus will be any guidance on future order flow as a new catalyst for the stock and the potential impact of a delay in new chips, which is currently anticipated to last a manageable six to eight weeks.
Earnings and events
Policy makers meeting in Jackson Hole from August 22nd to 24th will likely be the key event to watch for markets this week, followed by the Democratic National Convention from August 19th to 22nd. The calendar is light on fresh economic data, but holds the previous Fed meeting minutes on August 21st, German PMI on August 22nd, and Powell’s speech on 23rd.
Earnings: cybersecurity firm Palo Alto Networks, beauty products manufacturer Estée Lauder, supermarket chain Target, and IT software companies Synopsys and Snowflake.
