Swissquote: All-time highs, good times

August 31, 2021

By Ipek Ozkardeskaya, Senior Analyst, Swissquote 

Nasdaq hit fresh record on Monday, as Apple, Google, Facebook traded at all time highs at the wake of Jerome Powell’s Jackson Hole speech, where Powell said tapering is coming and the markets priced the fact that we have no details on the start date and on the pace of winding down the bond purchases.

Curious times.  

Data-wise, the US jobs data will be the focus of the week, with the ADP report due Wednesday and NFP print due Friday. The expectations are strong, the US economy is expected to have added some 650K private and 750K nonfarm jobs in August. But we know that the numbers could be significantly higher or lower than these expectations as, with the pandemic, we somewhat lost our ability to make good predictions on these jobs figures.

Still, strong job additions will certainly boost the investor appetite, along with the Fed’s cautious steps toward bond tapering, while a disappointment on the data front could lead to some profit taking, but nothing major, as BECAUSE we haven’t heard anything regarding the start date or the pace of bond tapering, there is always a bit of margin left for speculating to the dove-side.  

So, in both cases, we could see the markets advancing higher. Isn’t that great?   

The US 10-year yield is back below 1.30% and the VIX index hints at no sign of stress, at all. 

Gold consolidates gains above the $1800 per oz. The CFTC data shows that the net speculative positions in gold have been increasing, even though we are now at the lowest levels since the beginning of the pandemic, meaning that there is room for a further rise in these net speculative positions. From a technical standpoint, there is a clear positive shift in sentiment, with the medium-term horizontal triangle and the 200-dma broken to the upside. But we may not see a sustained rally establishing parallel to the equity markets. Appetite in equities should slowly wane appetite in the yellow metal.  

Else, Hurricane Ida is pressuring the natural gas and oil futures to the upside, causing severe damage in the Gulf Coast’s energy production. It is said that 94% of average natural gas production is shut and energy companies remain offline, which could impact gas prices.  

US crude came close to the $70pb. But as it has been the case in the prior storms, the impact of the hurricane on the energy prices will certainly remain short-lived. Therefore, what OPEC will say at this week’s meeting matters much more for the overall picture. And the fact that OPEC will likely continue wind down the production restrictive measures despite rising Covid worries could bring in the oil bears and cap the recovery near the $70pb level.