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07.08.2023 02:07 PM
US premarket on August 7: US stock market under pressure again

Futures on US stock indexes opened with a slight increase after another Friday sell-off, driven by a decreased appetite for risk following weak US labor market data. Treasury bond yields rose both on Friday and Monday during morning trading. S&P 500 futures gained 0.2%, while the yield on 10-year Treasury bonds increased by 8 basis points. NASDAQ futures rose by 0.3%. European stock indexes declined as Germany's industrial production fell to a six-month low in June, highlighting economic weakness.

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Meanwhile, investors continue to analyze the perplexing signals from the Friday employment report in the US. According to the data, wages exceeded economists' forecasts, despite a slowdown in wage growth. Unemployment rate declined even further, but the number of new jobs was lower than economists' predictions.

Considering the July rally, which happens almost every year, August promises to be calm, and it is not surprising that investors are taking profits, leading to market weakness. Market sentiments for this week will depend on new data. It will start with Germany's consumer price index and continue with the US consumer price index on Thursday and UK GDP data on Friday. The US core consumer price index is predicted to rise by 0.2% in July, the slowest growth in 2.5 years.

German bonds fell after the Bundesbank's statement on Friday about halting interest payments on domestic government deposits. This unexpected move caught traders off guard, leading to a sell-off in 30-year debt, resulting in the highest yield since January 2014.

Meanwhile, representatives of the US Federal Reserve say that further rate hikes may be necessary. Over the weekend, Michelle Bowman stated, "We don't think central banks will get the rise in unemployment rate and sustained moderation in wage growth in the coming year that they hope to see."

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In Asia, the yen fell for the first time in four days after the minutes showed that one of the Bank of Japan's members voted for the central bank to provide greater flexibility in managing the yield curve at the July meeting.

Regarding the S&P 500 index, demand for the trading instrument remains relatively low. Bulls may continue the uptrend, but they need to settle above $4,515. From this level, a surge to $4,539 may occur. An equally important task for bulls would be to control $4,557, which would strengthen the bullish market. In the event of a downward move due to decreased risk appetite, bulls will have to protect $4,488. A breakthrough would quickly push the trading instrument back to $4,469 and $4,447.

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