All sectors closed in the red overnight despite lower-than-expected CPI data. The issue is that many investors are not willing to buy in this market ahead of the FED announcement next week.
Market sentiment is very mixed, which has seen some profit-taking come into the US market. We are seeing the divide in sentiment grow with many analysts from the large banks in the US warn of a market crash. But on the flip side, there is still also many analysts out there predicting that the market has plenty more upsides left.
There is a lot for the market to digest over the next month. Early next week is the FED meeting where we expect them to announce a plan to start tapering their bond-buying. Many do not expect a taper tantrum this time around, but it will depend on the message. The market will want a clear and slow timeline in winding the bond purchases. Fed Chair Powell will also need to stay on message that interest rates will not go up when the bond-buying ends.
Bidens $3.5 trillion spending and new tax measures could also see some volatility in the market. This and debt ceiling issues will all arise in the next few weeks. With all this playing out it is likely to see the market continue to whip around.
Virus numbers could be finding a turning point in NSW, as the narrative remains centred around getting vaccinated and reopening. New South Wales is almost at 80 percent of adults with at least one dose of a COVID-19 vaccine, and Victoria should reach 70 percent first-dosed in the coming days. These rapid levels of vaccinated individuals should allow for the reopening plans to play out, with an end to lockdowns expected to start around late October. With this there is still plenty of light at the end of the tunnel, the issue is that much of this could already be priced into our market.
The XJO is expected to open lower, following a selldown in the U.S overnight. Our open should test 7,400 which has proven both historically and recently as a strong level of support.
U.S futures are flat this morning, indicating that last night’s selling is not at panic levels. If they tick into the green or at least remain flat through our session, hopefully we can hold the 7,400 level or there abouts.
Talk around inflation, the economy, tax, and government spending continue to dominate the news cycle. Our own RBA can’t see a rate rise before 2024, which should be positive for our market, but right now we are simply following the U.S. We will need to see a recovery from them to hold these levels.
Iron Ore continues its decent, with the recent support level clearly broken. Our miners have remained steady despite the recent selldown, but with today’s bearish open they will likely fall.
US shares closed lower overnight, despite the long awaited US inflation read coming in lower than expected. The read, a measure of consumer prices, came in softer than economists had been predicting and seemingly vindicated Fed Chair Jerome Powell’s view that inflation is more transitory at the moment. The read suggests that perhaps the economic recovery isn’t as strong as initially thought, and stocks that are tied to the economic recovery were the worst performers on the night. Many had suspected that the Fed would soon taper their bond buying, though now it may be less certain. All eyes turn to the Fed’s next meeting on the 22nd of September. There is also increasing talk about corporate tax lifts in the US to pay for the Democrat’s $3.5 trn stimulus plans, which could be adding to selling in the short-term. All eleven sector groups of the S&P500 closed lower, with Energy, Financials, and Industrials the weakest performers. Technology and Healthcare stocks fell the least.
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