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Week Ahead: August 30, 2021

Fawad Razaqzada Fawad Razaqzada 27/08/2021
Week Ahead: August 30, 2021 Week Ahead: August 30, 2021
Week Ahead: August 30, 2021 Fawad Razaqzada
The first part of the week ahead is likely to be dominated by the events that unfolded at the back end of the week about to end – namely Powell’s much-hyped speech at the Jackson Hole conference. We have plenty of data on tap throughout the week, which should provide plenty of trading opportunities.

On Friday, we finally heard from the Fed Chairman and the markets loved it, even though he said, what many had expected, that tapering bond purchases could begin before the end of the year. Stocks rallied, along with gold and major currency pairs. Powell confirmed that it “could” be appropriate to begin tapering this year, but re-iterated that it doesn’t carry direct rate-hike timing signal. This was interpreted by the market as the Fed Chair offering no fresh news and people who had betted on him providing some clear tapering timeline, were left disappointed. Ahead of Powell’s speech, all the other Fed speakers had come across as being more hawkish and that caused the dollar to initially rise and gold to fall. It looks like those comments trapped traders and now they are being squeezed.
 
So, I wouldn’t be surprised if gold were to stage a stronger recovery as we close the week and continue in the week ahead, although at the time of writing it was still contained inside its prior ranges. Concerns over inflation has eased somewhat in recent times, although not by much. On this topic, Powell added that: "Longer-term inflation expectations have moved much less than actual inflation or near-term expectations, suggesting that households, businesses, and market participants also believe that current high inflation readings are likely to prove transitory."

This was a further sign that the Fed will taper QE very gradually and rates won’t rise any time soon. Whether or not tapering will be announced at the September or October meeting will depend on how the virus situation unfolds and on incoming data – making the upcoming data releases very important, with the US jobs report on tap on Friday. But the market seems to have warmed to the idea of tapering. The market knows the vast stimulus programme was going to be reduced and it remained at full throttle longer than many had expected anyway.

Meanwhile, the European Central Bank is likely to keep its emergency measures in place for even longer, and this should keep risk assets supported just as the Fed starts to taper. In particular, European stocks may extend their gains in the week ahead, especially as the Eurozone economy is faring better relative to some of the other regions in the world, with delta variant kept at bay.

Economic data highlights

Monday
  • UK bank holiday
  • German and Spanish preliminary CPI
  • US Pending Home Sales
Tuesday
  • Chinese manufacturing PMI
  • Eurozone CPI flash estimate and GDP from France
  • US Consumer Confidence (CB) and Chicago PMI
Wednesday
  • Australian GDP, Chinese Caixin Manufacturing PMI
  • German Retail Sales, Eurozone Final Manufacturing PMIs
  • OPEC Meetings
  • ADP Non-Farm Employment Change, ISM Manufacturing PMI
Friday
  • Australia retail sales
  • Eurozone final services PMIs
  • US nonfarm payrolls reports
  • US ISM Services PMI
 
Chart to watch: Gold

Gold broke its bearish trend line on Friday, but it remained to be seen whether it would hold the breakout. If it can, we may very well see further technical buying as the bulls aim for liquidity resting above $1830, which if re-captured, could potentially set up an eventual drive towards $1900 next. However, if the breakout fails and price moves back below $1774, this would be a bearish outcome.
 
gold
Source: ThinkMarkets and TradingView.com


The South African Markets in Focus
By Kearabilwe Nonyana

The Market have clawed all the loses which were accumulated last week and we are close to the record highs on our benchmark JSE Top 40. We have seen a slew of results which were released from different corporations listed on the JSE and I have yet to see any bad results. Most of the corporates are beating their estimates and this has benefited shareholders for investing in the local market.

SSW

Sibanye Still water reported stellar numbers to the market with an improved operational performance as well as higher commodity prices resulted in the interim profits being higher by more than 100%. The company recorded an interim profit of R25.32bn, which is higher than the record interim profit recorded in the second half of 2020. SSW paid out more than 30% of its earnings in dividends. The new interim dividend will take the dividend yield over 10%. With a stock being so earnings accretive you would perhaps believe that it has returned great YTD returns for shareholders, but this is not true. The market continues to mis price this stock, and I feel this provides great opportunities to acquire great companies at very cheap valuations. The stock currently trades at a 5.57 P/E ratio and in comparison to its competitors, it remains truly under valued at least when we use this valuation method.

SA stocks

 

Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Meet our contributors
Fawad Razaqzada
×
Fawad Razaqzada
Market Analyst, London

Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms. He leverages years of market knowledge to provide retail and professional traders worldwide with succinct fundamental & technical analysis. Fawad also offers trading education to help shorten the learning curves of developing traders.
 
His colleagues consider him an expert at reading price action on the charts. This together with his deep understanding of economics and fundamental analysis, and trading experience, puts him in a great position to forecast short term price movements. Fawad covers a wide range of markets, including FX, commodities, stock indices and cryptocurrencies and his comments are regularly quoted by the leading financial publications such as Reuters and Market Watch. In addition to ThinkMarkets, Fawad also provides analysis and premium trade signals on his own website at TradingCandles.com.
 
 

Carl Capolingua
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Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

Kearabilwe
×
Kearabilwe Nonyana
Market Analyst, South Africa

Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives. His career in the financial markets has seen him hold various positions in global investment banks and global CFD and Spread betting firms. He has deep interest in using quantitative methods to help him understand and teach the fundamental drivers of asset prices.
 
 
 

Fawad Razaqzada
Fawad Razaqzada
Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms.
Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.
Kearabilwe
Kearabilwe Nonyana
Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives.

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Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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