Review of 31 August – 4 September: Dollar starts and wins. Forecast for the week September 7 – September 11

By | September 6, 2015

The collapse of China‘s stock market has become a normal decline. However, it did not give the American and European benchmarks demonstrate the possibility of a significant recovery. This is largely due to expectations of monetary policy the US Federal Reserve. As a result, Dow Jones fell 3.19%. NASDAQ fell by 3.12%. Hong Kong HSI on weak statistics from China ended the week with a total of -5.66%. The German DAX 30 (FDAX) attempted to recover on a soft comments head of the European Central Bank after the publication of decisions on monetary policy, but is a strong growth failed. As a result, the index closed the week with -2.42%.

The AUD / USD has updated the 6.5-year low at 0.6906. At the end of the week AUD / USD lost 3.64%. Precious metals in the week showed a mixed trend and ended it with a slight decrease. Gold has fallen in price by 0.17%, silver lost 0.42%. Brent crude oil at the beginning of the week trying to continue to grow. But to gain a foothold on the reached levels could not. As a result, the closure last Friday asset loses 1.24%. However, even data from Baker Hughes, reflecting the drop in the number of drilling rigs operating, could not support the oil, which declined under the influence of a strengthening dollar.

Chart of the week:

aud/usd chart
AUD/USD chart

The economic data of the last week:

  • Monday. US Energy Information Agency recorded a decline in production in the US from April to June to 300 thousand barrels per day
  • Tuesday . Reserve Bank of Australia kept interest rates at 2%
  • Wednesday. US: August change in the number of employed in the private sector from the agency ADP +190 thousand Less than the forecast 201 thousand
  • Thursday. The head of the European Central Bank at a press conference following the publication of the decision on the monetary policy hinted at the possibility of expanding the program of quantitative easing if necessary
  • Friday. US August unemployment rate of 5.1% – to a minimum since 2008
Forecast for the week September 7 – September 11
Stock market
Despite the fact that the number of new jobs created in the US in August, below expectations (173,000 versus 220,000 projected), the market apparently took NFP report as fairly strong. In general, rightly, as the unemployment rate fell to the lowest level since 2008 (5.1% against 5.3% in July). This means that even the current rate of job creation only if the employment rate showed stable positive dynamics. Moreover, as history shows, often the weak August data are very often subjected to correction for the better. It is also worth noting that the average wage index showed growth above expectations of 0.3% vs. 0.2%. But this is one of the key indicators that the US Federal Reserve estimates when deciding on monetary policy.
In general, the report is not very contrary to the regulator began to raise rates in the near future. And these expectations may exert pressure on the US benchmark. Especially because next week is not scheduled to publish a large number of significant reports, which could change these attitudes. And even if data on inflation at the producer level will be quite weak, it is unlikely to be able to support the index, given that the Fed Vice Chair Stanley Fischer in Jackson Hole, said that they did not have to wait until inflation returns to the target level to start tightening because monetary policy influences with a lag. So do not exclude the possibility of return of Dow Jones (YM) to the district level 15535, Nasdaq (NQ) to the level of 3990.00.
Next week will be published quite a number of reports on China‘s economy. Attention should be paid to data on the trade balance of the country, a report on the consumer price index and industrial production of China. The weak figures for exports and signs of further cooling in the production (which is quite possible, given the data on business activity in the industrial sector) may put additional pressure on Asian markets, including in the Hang Seng (HSI). Benchmark may be reduced in the area of ​​level 20060 with the further aim at around 19460.
Commodity and raw market
Quotes of Brent crude oil held above the level of 48.10 dollars per barrel. Overall, this confirms the assumption that the oil “groped” bottom. Nevertheless, the situation is still very controversial. On the one hand, it is fixed in US decline in production. According to EIA figure fell to 9.218 million barrels per day. For the first time since February of this year to produce less steel and the OPEC countries. In August, amid falling production in Iraq and Libya, the daily rate dropped to 31.71 million barrels per day. You can wait and falling supply from Canada. Oil companies due to the long period of low prices have already forced to cut staff, reduce the dividend and even sell hedged positions for raw materials and currencies to stimulate cash flow (as well as close to bankruptcy).
On the other, the struggle for market share continues. Saudi Arabia has already announced about lowering prices for consumers in Asia, north-western Europe and the United States. This, coupled with fears of reduction in demand from major importers might have on quotes black gold moderate pressure. These factors could offset the impact of each other, which can lead to the stabilization of quotations of Brent crude oil within the range of 46.40 – 55.00. Although data from Baker Hughes gives reason to expect acceleration of production cuts in the US (due to lower number of working rigs), that does not rule out attempts to break above the 55.00 level.

Warning: Profitability in the past does not mean profitability in the future. Any projections are for information only and does not guarantee a result.

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