Review of July 27-31: when the Fed is no unity. Forecast for the week August 3 – August 7

By | August 1, 2015

Last week, stock indices showed mixed trends. As a result, the German DAX (FDAX) completed the five-day period without changes. US NASDAQ and Dow Jones showed a symbolic increase of 0.46% and 0.63%, respectively. The impressive sales recovery gave way Monday after the results of the meeting of the US Federal Reserve did not bring clarity to the issue concerning the timing of the rate hike. Hong Kong HSI remained under pressure, falling to 1.28%, moving behind Shanghai Composite.

Precious metals finished the week mixed. Gold (XAU / USD) has fallen in price by 0.33%, silver (XAG / USD) has added 0.61%. Brent crude oil (BRN) «closed» week below 52.00, having fallen in price by 5.18%, and at least semi-pointing. “Black Gold” remained under pressure from fears of lower demand from the euro zone and China, as well as data on the number of drilling rigs operating in the US, again showed an increase according to Baker Hughes.

Chart of the week:

brent price chart
Brent price chart

The economic data of the last day:

  • Eurozone July, core CPI to 0.9% – higher than the forecast of 0.8%
  • US: Q2, the index the cost of employment of 0.2% vs. 0.6% – to a minimum since 1982
  • US July consumer confidence index 93.1 – below the forecast of 94.0

 Forecast for the week August 3 – August 7

Stock market
The new working week promises to be no less exciting than the previous one. After the release of data on labor costs for the 2nd quarter in the United States reflected the minimum rate of wage growth since the beginning of research in 1982 (0.2% vs. 0.6% expected), are particularly important data on non-farm payrolls that the Fed focuses on when deciding on the rate. Only under the condition that the index will be released above expectations (220 thousand.), The belief that the Fed is able to start tightening in September, could return. And it can put pressure on the US benchmark.
In this case, we can assume that the Dow Jones (YM) and Nasdaq (NQ) resumed its decline, aiming for a return to 17350 and 4477.16, respectively. Although, if the average hourly wages do not rise, confirming the absence of inflation on the salary level, the market may experience optimism, as inflationary pressure is the second prerequisite for tightening. And then, Dow and NQ will get a chance to strengthen, at least in the area of ​​recent highs: 17870 and 4640. Also, out of sight is not necessary to exclude data on business activity in the industrial and service sectors that can add clarity to the economic painting.
Commodity and raw market
Brent crude oil to consolidate below 52.00 level, technically opened on its way down to around $ 50 a barrel. But it is possible that the fall in the area will not be long. This week Factor expectations decline in consumption by China and the euro zone can move to the background as a whole, it is already built into the price. Although, of course, the strengthening of the dollar provided a strong release of statistics, the correlation with the dynamics of the oil is renewed, it can act as a limiting factor for growth. For the rest, it can be assumed that the quotes of “black gold” will try to get back to the level of 53.70.
The latest data on commercial stocks in the United States reflected the decline. Moreover, as it became known, production in the United States declined by 145 thousand barrels per day. This, of course, a little bit, especially when you consider that the number of operating drilling rigs began to increase. However, if you pay attention to the fact that energy companies are beginning to optimize costs and reduce job, you can expect that to happen in the medium term rather sharp decline in production volumes. All of this only confirms that the oil at 50 dollars a barrel is hardly satisfied with most of the manufacturers. 
Warning: Profitability in the past does not mean profitability in the future. Any projections are for informational purposes and does not guarantee a result.  
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