US equity markets showed signs of trepidation ahead of Federal Reserve Chairman Jerome Powell’s anticipated speech at the Jackson Hole symposium. Contributing to the uncertainty were a pivotal interview from the Philadelphia Fed’s president, proposed expansion of the BRICS bloc, and mixed economic indicators. Meanwhile, gold reached a two-week high and crude oil prices exhibited volatility.
The Nasdaq Composite faced a decline, dropping 1.9% to 13,464, trailed by the S&P 500’s 1.4% fall to 4,376.3, and the Dow Jones Industrial Average’s 1.1% loss to 34,099.4. Markets were seemingly reacting to an interview reported by CNBC with the Philadelphia Fed’s president, Patrick Harker, who emphasized the necessity of high rates to control inflation.
Tensions mounted following reports that the BRICS bloc of developing nations intends to invite Saudi Arabia, Egypt, the UAE, Iran, Argentina, and Ethiopia, to join the grouping starting January 1, 2024.
Interest Rates and Bonds:
In the bond market, the US 10-year yield rose by 3.9 basis points to 4.24%, and the two-year rate grew by 6.4 basis points to 5.02%, potentially reflecting anticipation of Powell’s remarks.
July’s US durable goods orders recorded an unexpected decline, falling by 5.2% to $285.93 billion, surpassing the consensus of a 4% drop. Contrarily, jobless claims data showed a decrease, underscoring the US labor market’s resilience despite the Fed’s aggressive interest rate hikes.
The US Dollar surged by 0.63% to 103.99 ahead of Powell’s speech. The GBP/USD dipped by 1.03% to 1.26085, reflecting a near 2-month low following a contraction in UK’s PMI in August. Concurrently, the Japanese Yen continued to experience pressure, with USD/JPY rising 0.7%.
Gold prices ascended to a two-week high, fueled by weaker-than-expected U.S. business activity data and the retreat of the Dollar. Spot gold ended at $1,920.67/oz, and COMEX December gold futures settled at $1,948.75/oz. Crude oil prices witnessed a volatile session, with West Texas Intermediate (WTI) crude closing nearly flat at $78.92 per barrel.
Most major digital assets echoed the decline in US equity indices. Bitcoin (BTC/USD) was down by 2.8% at $26,013, while Ethereum (ETH/USD) fell by 2.7% to $1,649.
Investors and traders will likely focus on Fed Chair Powell’s speech, seeking insights into the Fed’s perspective on interest rate hikes and policy direction. The outcomes of the Jackson Hole Symposium, coupled with ongoing global developments and economic indicators, will continue to shape market dynamics in the coming days.