1. Macro data:
- Former St. Louis Fed President James Bullard said the central bank should not abandon plans for one more rate hike this year when it updates its forecasts later this month.
- Boston Fed President Collins said patience is needed in assessing economic data to determine the next move, and trends show that further interest rate hikes may still be needed.
The ISM Services Index rose to 54.5 in August (vs. 52.5 expected) from 52.7 in the previous month, a reading that was expected to fall but was higher than all economists expected, which naturally caused a strong reaction in the market.
2. Market Overview
- The dollar index rose 0.2% and is about to hit the high of 105.83 reached during the banking crisis in March;
- The benchmark 10-year Treasury yield rose to 4.289% from 4.267%, while the 2-year Treasury yield, which is more sensitive to Fed policy expectations, climbed to 5.022%;
- U.S. stocks fell across the board, from real estate company stocks to manufacturers and bank stocks. The Dow Jones Industrial Average fell 0.6%, the S&P 500 fell 0.7%, and the Nasdaq, which is concentrated in technology stocks, fell 1.1%;
- The offshore RMB fell 0.2%, falling for the third consecutive day, and the market's short-selling sentiment intensified after it fell below the 7.30 level;
- Bitcoin fell 0.09%, Ethereum fell 0.08%;
- U.S. crude oil remained stable near $90 as the market digested OPEC+'s supply cuts;
- Spot gold fell 0.5% and silver fell 1.7%.
3. Market Comments:
Yesterday's market dynamics were consistent with what we have seen in the last month, characterized by heightened sensitivity to economic data, with "bad news is good news and good news is bad news" for stocks, rallies on weak economic data, and sell-offs on strong data (too strong data would increase the risk of additional rate hikes).
The strong rise in the US dollar index and the long-term high levels of US Treasury yields (10y, 5y) are actually unfriendly to risky assets. The continuous decline in gold futures in recent days from last week's high of around 1976 to around 1940 is a verification of this. The rise in oil prices caused by the supply of crude oil will exacerbate concerns about future inflation. On the whole, the real interest rate remains high and has broken new highs, so it is inevitable that gold will be under pressure.
In September and October, the financial market will inevitably be turbulent and volatile. Market opportunities and risks coexist. Are you ready to face the storm?
