💡Quote of the week
“Expect Powell to perform a balancing act of highlighting success to date in reducing headline inflation from 9.1% to 3.2% while also acknowledging it’s too early to declare victory.” - Ronald Temple, the chief market strategist at the investment firm Lazard
🏦 🇺🇸 All eyes on Jackson Hole. Jerome Powell, head of the Federal Reserve, is set to address the annual central banking summit in Jackson Hole. While the market anticipates reassurance that U.S. interest rates have stabilized, Powell is expected to maintain caution regarding inflationary pressures. (We'll catch you up on all the details from Powell's Jackson Hole speech next week!) (FT)
Last year, Powell's unexpectedly hawkish speech sent shockwaves through markets. However, with interest rates at historic highs, Powell's message is likely to be more nuanced this time. Analysts speculate that he may still create market tremors, especially given current unease about rising US long-term borrowing costs.
Ronald Temple, Lazard's chief market strategist, predicts Powell will balance the Fed's progress in curbing inflation with a cautious stance on future rate hikes.
⭐ Gold inches lower as investors await Jackson Hole signals. Gold slipped slightly on Thursday as U.S. labor market data boosted the dollar and yields, yet the precious metal remained within a narrow range, with traders gearing up for insights from central bankers at the Jackson Hole symposium.
Spot gold dipped 0.02% to $1,913.99 per ounce, holding close to recent highs. U.S. gold futures saw a 0.3% decline to $1,941.60.
Despite a dip, the labor market's strength suggests the Fed might maintain higher rates for a prolonged period.
📉Worst month for stocks in almost a year. Indices like Wall Street's S&P 500, Europe's Stoxx 600, and China's CSI 300 collectively lost around $2.8tn in August, roughly 5% of their total value. (FT)
Analysts highlight a "witches' brew" of factors dampening sentiment, including China's economic woes and mounting worries about the real estate sector.
Technology stocks, including giants like Apple, Nvidia, Tesla, and Microsoft, have been among the hardest hit, contributing to the market downturn.
Despite a strong first half of the year, the sudden shift in market sentiment has raised concerns about equity valuations and the outlook for growth.
🇪🇺 🤒 The euro-area economy is going through a tough time. The previously robust performance of service sectors, including restaurants and retail, has hit a stumbling block this month, aligning with the challenges already faced by industrial sectors. The German economy saw its biggest drop since May 2020's first wave of the pandemic, while the French economy also shrank for the third month straight. (Bloomberg)
The Purchasing Managers' Index (PMI), which helps us know if businesses are doing well or not, dropped to 47 in August, prompting economists to sound the alarm.
The PMI is like a report card for businesses. It helps us know if businesses are doing well or not. If the PMI number is above 50, it means businesses are growing. But if it's below 50, it means they're having a tough time.
🛢️ 📉 Oil prices falter. Oil prices took a dip in early trading on Wednesday, grappling with worries about prolonged higher U.S. interest rates and a potential slowdown in China's economic growth, which could dent fuel demand. (CNBC)
Brent crude slipped 0.2% to $83.86 a barrel, and U.S. West Texas Intermediate crude edged down 0.1% to $79.56 a barrel, as investors ponder the impact of evolving economic dynamics.
As markets grapple with the potential consequences of shifting economic factors, including interest rates and China's economic performance, the oil industry holds its breath for upcoming announcements and data releases, including the Jackson Hole meeting, that could offer insights into the path ahead.
👮♂️ Go to jail! Two former high-ranking figures at JPMorgan Chase & Co.'s precious-metals desk have been sentenced to prison for their roles in spoofing, fraud, and market manipulation. This marks a significant development in the ongoing crackdown on questionable trading practices, with the heaviest sentence to date. (Bloomberg)
Michael Nowak, previously in charge of gold and silver trading, and trader Gregg Smith have been sentenced by US District Judge Edmond Chang in Chicago. Nowak received a one-year-and-one-day term, while Smith was handed a two-year sentence, signaling a stern stance on market manipulation.
The two were convicted in a trial last year, with Smith being referred to as a prolific "spoofer," and Nowak characterized as the driving force behind the manipulation scheme.
📸 Image of the week
🤔 China's brewing debt crisis: a Lehman moment on the horizon? As signs of turmoil intensify in China's financial landscape, concerns grow about an impending debt crisis. Recent defaults and economic woes have prompted comparisons to the 2008 Lehman Brothers collapse. The nation's banking system's substantial exposure to toxic debt, coupled with a unique approach to handling financial challenges, raises questions about the need for a cleansing shock to prevent a bigger catastrophe. (Bloomberg Opinion)
Warning bells echo as China's financial ecosystem teeters on the edge. Defaults by significant players like Country Garden Holdings Co. and missed payments from private wealth managers have triggered distress signals. Strains from regional governments reliant on land sales add to the concerns.
China's banking system holds a massive load of local government debt, accounting for 29% of total assets. Additionally, it faces exposure of around 58 trillion yuan to the real estate sector. A Lehman-like moment seems possible.
What else is happening
🌑 🚀 To the moon! India becomes the 4th country to land on the moon, following Russia, the U.S., and China. Notably, it claims the distinction of being the first to land on one of the moon's lunar poles. (CNBC)
Launched last month, the Chandrayaan-3 mission achieved a successful landing at approximately 8:34 a.m. ET.
Earlier this week, Russia's long-awaited return to lunar exploration ended in failure as its Luna-25 spacecraft spun out of control and ultimately crashed into the moon. The mission faced a critical setback during preparations for its pre-landing orbit, highlighting the stark decline of Russia's once-potent space program in the post-Soviet era.
✈️ Mysterious plane crash. A plane crash north of Moscow has sent shockwaves through Russia as Yevgeny Prigozhin, the head of the Wagner mercenary group, was reportedly on board with no survivors. The incident occurs just two months after Prigozhin led a dramatic mutiny against the Russian army's top brass. (Reuters)
The circumstances surrounding the crash raise questions, with a Telegram channel connected to Wagner pronouncing Prigozhin dead, casting him as a heroic figure who fell at the hands of "traitors to Russia."
Although there's no official word from the Kremlin or the Defence Ministry about Prigozhin's fate, the crash site paints a grim picture. Black body bags were observed being stretchered away, and fragments of the aircraft were scattered near a wooded area. The crash's enigma has sparked speculation ranging from Russian state involvement to actions linked to Ukraine's Independence Day.
👇 Russia points fingers at the West. President Vladimir Putin blamed the “the West and its satellites” for unleashing war as he addressed the BRICS summit remotely. He reiterated his stance that the expansion of NATO and other Western actions drove Russia's intervention in the Ukraine conflict. Meanwhile, Ukraine reported thwarted drone strikes by Russia on its southern Odesa and Danube regions that triggered fires at multiple grain facilities. (CNBC)
In the meantime, Russia claimed to have thwarted a series of Ukrainian drone strikes on Moscow, marking the sixth consecutive day of reported incidents. This escalation in drone activity adds to the tensions between the two nations.
🧩 A surprise piece in a puzzle we thought was complete. In a groundbreaking experiment, scientists have uncovered puzzling behavior from a tiny particle known as a muon. This unexpected discovery is causing researchers to question what we know about how the universe works. (Reuters)
In the experiment, scientists looked at how muons wobbled when they moved through a magnetic field. Muons are like electrons and have a little magnet inside them that makes them wobble, kind of like a spinning top's handle moving around.
But what surprised everyone was that the wobbling speed didn't match what scientists thought it should be according to the usual rules of particle physics.
"We are looking for an indication that the muon is interacting with something that we do not know about. It could be anything: new particles, new forces, new dimensions, new features of space-time, anything," said Brendan Casey, a senior scientist at Fermilab said.
See you next week!