The major US stock market index S&P500 has been consolidating near historical maximum on a mixed news background. Among the negative factors, it is worth highlighting the absence of an agreement on a new economic aid package in the United States, as well as the growing tensions in relations between the United States and China. Republicans and Democrats, after mutual reproaches for their unconstructive position, have not been able to return to the negotiating table. Negotiations on the implementation of the first phase of the trade agreement between the US and China, which were supposed to take place on August 15, have been postponed indefinitely. Meanwhile, following the ban on TikTok and WeChat, Donald Trump did not rule out imposing restrictions on other Chinese tech companies.
The positive factors for the stock market are:
- Progress in the development of a coronavirus vaccine. Russia became the first country to officially register a vaccine against coronavirus. China has granted a patent for a vaccine to the company Cansino, becoming the second country to officially register a vaccine. However, these vaccines did not pass the final third phase of the trial.
- Positive macroeconomic data indicating an economic recovery in most developed countries.
- Shortening distance between Donald Trump and Joseph Biden in the race for the US presidency. According to the latest polls, Biden is gaining 50% of the votes, and Trump – 46%. The incumbent president managed to narrow the gap significantly compared to June. The growing chances of Trump to win presidential elections are positive for the stock market, as Trump favors tax cuts while Biden stands for tax increases.
The price of oil spent the past week in a consolidation phase. On Monday, a meeting of the OPEC + technical committee will take place, at which the committee will assess the current situation on the oil market. On Tuesday, a meeting of the monitoring committee will take place, which will assess the observance of the OPEC + countries with the current quotas. China’s oil imports in August may reach a record high of 32 million barrels, due to the need to fulfill commitments under the first phase of the trade agreement with the United States.
The price of gold made a downward correction on the background of rising US government bond yields. The decline in the gold price on Tuesday was the record one-day drop since 2013.
Main events of the current week
- On Tuesday, data on the number of building permits issued in the United States will be presented, and minutes of the meeting of the Reserve Bank of Australia will be published.
- On Wednesday, data on consumer price index in the UK, eurozone, and Canada will be released, as well as data on crude oil inventories. FOMC meeting minutes will be published as well.
- On Thursday, data on US jobless claims and Philadelphia Fed Manufacturing index will be presented, as well as minutes of the ECB accounts of monetary policy meetings.
- On Friday, data on retail sales, and PMIs in the UK, German manufacturing PMI, retail sales in Canada and existing home sales in the US will be released.
Corporate earnings reports
- Walmart will release its quarterly report on August, 18 before the market open. Walmart has invested heavily in the development of e-commerce and that investment is paying off. Walmart is now the second-largest e-commerce retailer in the US after it overtook eBay in May. The company also announced the launch of the Walmart + subscription service, which will include a same-day delivery offer.
- Nvidia will report earnings on August, 19 after market close. The company’s shares hit an all-time high after the announcement of a special Geforce event where Nvidia’s CEO will talk about the company’s latest gaming and graphics innovations. The introduction of lockdown restrictions has had a positive impact on the company’s business due to the growing demand for Nvidia’s GPUs and data centers that are used in cloud platforms.
- Alibaba will release its quarterly report on August, 20 before the market open. China’s rapid economic recovery has boosted consumer spending, increasing the revenue of Alibaba, which controls about 50% of China’s fast-growing e-commerce market. The introduction of lockdown restrictions has also boosted demand for cloud services. Alibaba is a leader in the Chinese cloud services market and plans to go global, announcing its intention to invest about $28 billion in this business.
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