With US jobs growth disappointing badly in August, investors will be keen to find out whether other macro pointers also weakened in August and to what extent. Up next is
US retail sales, due for release at 13:30 London time.
With several unemployment-related benefits expiring, consumers are likely to splash less on non-essential items in the coming months, and this is something that might be reflected in falling retail sales. In fact, for the month of August, economists predict retail sales are likely to have fallen another 0.7% after an unexpected 1.1% plunge the month before. Core sales are seen edging only a touch lower after declining 0.4% in the previous month.
If actual data reveal even weaker numbers, then we may very well see renewed weakness in stock markets, after Wall Street managed a decent bounce off their lows on Wednesday.
Stagflation concerns are growing rapidly, and this has the potential to weigh heavily on the markets going forward.
Surging oil, gas and electricity prices have intensified inflationary pressures stemming from supply bottlenecks and temporary factors. Meanwhile the recent trend of economic data from China and the US have not been great, raising
fears that the economic recovery is slowing at the world’s two largest economies. Further pickup in inflation momentum will make life very difficult for central banks. They will have to tighten their policies to prevent hyperinflation risks. This will not be good news, especially for
growth stocks. But it could also be bad for other sectors as rapidly rising energy prices in Europe has forced some factories to halt production.
Rising input costs are going to squeeze manufacturers' margins and hurt their profits.
The drop in buying power of consumers will only make things worse.
Meanwhile, we will also have a few other important macro pointers to look forward to today, including weekly
jobless claims, Philly Fed Manufacturing Index
and Natural Gas Storage – the latter is going to be important for natural gas prices, which have been surging to multi-year highs.
On Friday, we will find out how surveyed consumers feel about the economy and inflation, as the University of Michigan releases its closely-watched surveys. Inflation expectations have been climbing higher along with actual inflation. If consumers’
inflation expectations rise further, then this can manifest into real inflation, as workers will push for higher wages to compensate for rising prices in order to prevent their real earnings from dwindling.
Ahead of the upcoming data releases,
Nasdaq futures have weakened after staging a nice recovery in the previous session. The index is still holding below key resistance at 15520, a level which until recently was support. The short-term bias remains bearish while the index holds below this level, despite yesterday’s recovery. If the index falls further lower and take out 15350 support, then this could trigger a sharper correction than we have so far seen for US stocks since the latest rally to new all-time highs.
Source: ThinkMarkets and TradingView.com