Stocks rebounded on Monday, in a move that looked more like a correction than a reaction to fresh news, as there was no fresh news that went against the slowing China rhetoric, nor against the fear that we will hear something sufficiently hawkish this Friday from Jerome Powell’s Jackson Hole speech.

Tech stocks fueled the rally in the US, as Nvidia jumped 8.5% yesterday, a day before the release of its Q2 results. Nvidia would better meet its $11bn sales forecast for last quarter, otherwise, there is a chance that we will see a sizeable downside correction.

In Europe, oil stocks shouldered yesterday’s rally, as the barrel of US crude made an attempt above the $82pb, on lower OPEC+ exports and on the back of a golden cross formation on a daily chart where the 50-DMA crossed above the 200-DMA. But yesterday, that wasn’t the case. Oil’s positive attempt remained short-lived, on the contrary, and the barrel of crude is preparing to test the $80pb support to the downside again this morning.

In the FX, the US dollar broadly weakened across the board, helping majors to take some breather. But the rising real US yields will likely continue giving support to further USD appreciation.

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The week starts with weak appetite as Chinese banks cut loan rates less than expected; the 1-year LPR was cut by 10bp to a record low versus 15bp cut expected by analysts, while the 5-year LPR was left unchanged despite pressure from Beijing. Chinese banks’ decision to keep the 5-year rate steady is confusing for investors, in the middle of a property crisis. The Hang Seng index sank further into bear market, and the global risk sentiment is less than ideal as healthy economic data from the US, and darker clouds over China cast shadow on both stock and bond markets.
This week, investors will have their eyes and ears on Federal Reserve (Fed) Chair Jerome Powell’s Jackson Hole speech due Friday.

Elsewhere, the BRICS summit will take place this week between 22nd and 24th of August. A month ago, South Africa said that 40 more nations wanted to join BRICS, and 23 of them formally applied to become members including Saudi Arabia, Iran, and UAE. They would like to drop US dollar and eventually start using member-state currencies to settle their trade terms between them, and there are rumours that the BRICS countries could even issue a gold-based currency to replace the US dollar, as many nations are willing to free themselves from the risks of holding and using US dollars.

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The global selloff intensified yesterday, after the FOMC minutes released Wednesday highlighted that the Federal Reserve (Fed) continues to see significant risks to inflation. And if that’s not enough, Atlanta Fed’s GDPNow printed an eye-popping growth forecast of 5.8% for Q3 on Wednesday, up from 5% printed a day before. We see some respite in the US 2-year yield that bounced lower from the 5% mark earlier in the week, and the 10-year yield spiked above 4.30% before falling back to 4.25% this morning. But the selling spree in global bond markets continue, as the US dollar continues strengthening against major peers.

And note the upcoming changes in US Treasury bond and T-bill issuance may further weigh on US bond valuations, and market liquidity.
In this context, this simultaneous selloff in stocks and bonds indicates that the market liquidity is well draining and Bitcoin, which is a gauge of market liquidity, slumped more than 7% yesterday and traded close to the $25K level.

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FOMC minutes released yesterday showed that most Federal Reserve (Fed) officials see ‘significant upside risks to inflation that may require more tightening’. The US 2-year yield remained little changed at around the 5% mark, while the 10-year flirts with the 4.30% level, approaching last October’s peak, raising questions among investors on whether levels above 4% are a good entre point in the US 10-year papers, or could it go higher? The US dollar extends gains, as the S&P500 and Nasdaq’s losses deepen.

In Europe, the latest data released yesterday showed that growth and industrial production slowed, but slowed less than expected, while employment deteriorated less than expected – giving the European Central Bank (ECB) a good reason to continue its fight against inflation. But on a microscopic level, news were less encouraging. The EURUSD remains offered below the 100-DMA yesterday, and the bears eye 1.0790, the 200-DMA.

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The Americans continue spending, US retail sales grew 0.7% on a monthly basis and more than 3% on a yearly basis - the biggest figure since January. The resilience of the US consumer spending sapped investor sentiment by fueling inflation expectations and Federal Reserve (Fed) hawks. Yields rose, stocks fell and USD gained.

In Europe, Cable bulls resist to the bears around the 1.27, on record wages growth and sticky inflation while Europeans watch GDP and industrial production data to assess the slowdown in economy.

Far away, the Reserve Bank of New Zealand (RBNZ) held its cash rate unchanged for the 2nd consecutive month but warned that there is a risk that activity and inflation measures do not slow as much as expected, and due today, the FOMC minutes will likely show that the Fed officials remain cautious despite the latest fall in inflation numbers.

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