In this weekly market outlook, the host opens by reminding viewers to subscribe before diving into the key themes shaping the week of August 22‑26, 2022. The centerpiece is Federal Reserve Chair Jerome Powell’s Jackson Hole keynote on Friday, which is expected to reaffirm the Fed’s commitment to further rate hikes but likely stop short of detailing the size of the next move. The host discusses how recent hawkish comments from Fed officials, especially non‑voting member Michelle Barkin, have pressured gold lower (gold trading below $1,750 and ETF holdings falling for a tenth week) and bolstered the dollar. Oil prices are also examined, with WTI slipping below $90 amid speculation about a potential Iranian supply resurgence following diplomatic talks on the nuclear accord, though analysts caution any impact could be delayed up to a year. Chinese economic weakness is highlighted, noting severe power cuts in Sichuan province, lingering effects of the PBOC’s surprise rate cuts, and downgrades of growth forecasts, all weighing on crude demand. The host then outlines the macro data calendar: Eurozone flash PMI (forecast 49.5), US durable goods, initial jobless claims, a second estimate of US GDP, German IFO, and the core PCE inflation figure (expected 0.3% YoY) slated for Friday alongside Powell’s speech. Historical data shows Jackson Hole speeches have moved the S&P 500 modestly (average 0.4% move), with options markets pricing a 1.4% move on the day. Finally, corporate updates are covered: Credit Suisse’s leadership reshuffle (new CFO Dixit Joshi from Deutsche Bank and COO promotion of McDonagh after appointing CEO Ulrich Körner) and Vodafone’s $1.8 billion cash sale of its Hungarian unit to 4iG/Kovinis. The host invites comments and wishes viewers a good week.
Chapters
Okay, hello and good morning. I hope you had a fantastic weekend. And before I begin, don't forget to like and subscribe to the channel if you want to keep up to speed with our outlook every Monday morning. But one of the main things we're looking out for this week, of course, is my man Jay Powell is going to be giving the Jackson Hole Symposium speech on Friday, and that's really going to draw much of the main focus for this week. And the reason for that is because this is one of the main platforms outside of the preset kind of 8 scheduled FOMC meetings per year when the Fed chair gets to give an update on the economic climate and, if needed, give some further clarity and guidance towards what policy could look like in the future. And of course, everyone's waiting to see what the Fed are going to do in September and whether or not they'll pull the trigger on a third consecutive 75 basis point rate hike. But we'll talk about that a little bit more in a moment. I'm going to kick things off and talk about commodities, starting off with gold, which as you can see here is at a 3-week low as Fed officials reiterate their hawkishness. The latest being Barkin, who I must stress is a non-voting member, but has said will curb inflation even at the risk of recession, and comes on a string of also subsequent hawkish comments that we heard from a variety of Fed officials last week. The debate really is between how aggressive do they tighten going forward, i.e., 75 or 50, but we have seen that then translate into this divergence. Traditionally, that's what we tend to see, which is dollar strength on the premise of further Fed tightening to get on top of inflation. And as a consequence, then the yellow metal gold has been declining. And as we can see from the stats here, um, holdings in bullion-backed ETFs have dropped for a 10th straight week at the moment, this moment in time, with gold this morning trading firmly below $1,750. Announced. Elsewhere in the commodity space, oil resumes drop. WTI crude this morning trading back below a $90 handle. The possible return of Iranian supply in focus, and a lot of that comes as US President Biden last night on Sunday spoke with leaders from France, Germany, and the UK about reviving that nuclear accord deal. Whether or not that happens, still I'm not so sure. Seems like we've been here many times before and it's always stumbled at the final hurdle. Last week we heard Goldman Sachs say irrespective of whether or not they get a deal done, that doesn't mean we're going to get an instant immediate supply flush from Iran because it's going to take somewhat up to 12 months or so before they can really start pulling that lever and pumping to, to that magnitude. However, analysts at the Dutch bank ING I read this morning were saying that potentially Iran could tap into their current existing storage and inventory And therefore that could add a little bit of a bump to the supply situation. And of course, all of this comes as crude oil has been declining south for some time. This isn't a new pattern, predominantly on the back of the weakening of demand on the global picture at the moment. And of course, a key component of that has been China. And one thing to be aware of over the weekend is the Chinese province of Sichuan, which approximately has a population size around 80 million. So that is bigger than Britain, just to give it some context. They've extended extended industrial power cuts. They've activated its highest emergency response on Sunday due to electricity supply deficiencies. This is having impact on the performance of allowing factories to operate, and that's compounding further fears of economic weakness in China. And all of this to do with extreme heat that they're experiencing at the moment. So as we saw, remember last week, surprise rate cuts from the PBOC, the Chinese central bank, lots of economic data points showing real pressure. And we saw a number of Wall Street banks downgrading their calls for economic growth figures for this year and next year in China, way shorter than what the state government of Beijing are anticipating at this point in time. So that continues to be the kind of picture that's weighing on crude oil for the time being. But as I said, Jerome Powell is the main event of this week. It's not going to come until 3 PM on Friday when he speaks at Jackson Hole for the keynote speech. He's expected to state the Fed's resolve to keep raising interest rates to get inflation back under control, but he's probably going to stop short of signaling on how big the Fed officials will go next month. One of the key things here not to forget is we're still 30 days out or so from the next FOMC meeting, so of course a lot can happen. From a scheduled point of view, there are two important things. One is the August jobs report is due to be published on the 2nd of September, and then we'll get the August inflation report on the September as well. These will be very crucial inputs for that decision-making process at the Fed and what they're going to do at that point in time. One thing I was looking at this morning was this, and this was basically looking at the fact that Fed Chair Jackson Hole's speech has not been a big market mover in recent years. This is just looking at the S&P percentage fluctuation, kind of change on a day he gives a speech, and you can see here on an average basis tends to have an impact value of probably around 0.4% on average going back over the last 10 years. So that's pretty tame. And actually, options positioning shows traders expect a 1.4% move in the S&P 500 on Friday when he gives his speech. That's only slightly above the expected 1% daily move options are implying for stocks over the next month. So again, for those aforementioned reasons of this being a little bit perhaps too far out to make definitive judgments on what the Fed are going to do at their next meeting, meaning that markets remain relatively calm at this point despite the kind of importance of that speech he's going to give. Nonetheless, we'll be watching very closely, of course. From a data perspective, we really kick off things on Tuesday this week, and that's because we get the various flash PMIs for August. And, well, excuse me, yeah, for August, just double-checking there. For what we're going to see is Eurozone economy is likely to continue to deepen in terms of its just general perception of its economic woes. Um, the flash eurozone PMI is forecast to drop from 49.9 to 49.5. I don't think that comes as a whole great deal of a surprise, and one of the things it probably does do though is just fit the narrative of the fact that we are heading for a recession there. From the US perspective, durable goods on Wednesday, initial jobless claims, and the second reading of US GDP on Thursday alongside German IFO as well, which is the business sentiment kind of survey another important reading, but also likely to deteriorate from the prior month. And then on Friday, alongside Powell, you get the core PCE numbers, which are very important in the US, of course. And the reason why is because that's the preferred measure of inflation for the Fed, and in fact is expected to have cooled in July. The core reading is expected to come in at 0.3% from the prior reading of 0.6%, and that follows last month's lower-than-expected CPI report that we saw, and also an unexpected decline in producer prices, PPI. So this idea of, are we at the point of peak inflation? What does that now look like in terms of the more broad-based measurements of which the Fed will be looking at to make those decisions come the September FOMC meeting? From a stocks perspective, just quickly, continued shakeups, of course, at Credit Suisse as they look to get their house in order. They've now appointed a couple of people. For one, they've hired Deutsche Bank's Dixit Joshi as their CFO, and they've promoted internally McDonagh as their Chief Operating Officer. This comes just a month or so after they appointed Ulrich Körner as their new latest chief executive. And then for Vodafone in the FTSE, a fairly large deal there to sell its Hungarian business for $1.8 billion in cash. That's to the Hungarian 4iG and state-run Kovunis cert company. But that is it for the outlook for the week ahead. So plenty of US data points to get your teeth into, bookended with Jerome Powell on Friday. Any questions at all, feel free to drop me a comment below and have yourself a great week ahead. Take care.
