Aviso Weekly Market Monitor: August 28th – September 1st

Sep 5, 2023

Market developments

Equities:
U.S. stocks saw a significant weekly rise as monthly jobs data suggested the Federal Reserve might halt its tightening measures. The S&P 500, Nasdaq, and TSX all increased by over 2.5% ahead of the long weekend. Despite improved hiring in August, wage growth slowed, and the unemployment rate unexpectedly rose to 3.8%. This may influence the Fed’s decision on interest rates. Some individual stocks like Lululemon, Dell Technologies and Eos Energy rose due to positive announcements. However, some caution remains in the market, with concerns about a potential economic “hard landing.”

Fixed income:
In response to recent developments, Treasury two-year yields fell by 20 basis points to 4.87%, signaling reduced expectations of further rate hikes this year. Swap contracts now suggest less than a 50% chance of another rate increase and even speculate on a rate cut in May instead of June. U.S. 10-year real yields saw virtually no change this week as it hovers around 1.92%. The focus in the U.S. session includes personal income and spending data, which includes the PCE deflator, the Fed’s preferred inflation measure.

Commodities:
Oil prices reached their highest point this year, with U.S. benchmark crude up over 7.5% for the week, driven by supply concerns and positive Chinese manufacturing data. August marked the third straight monthly gain for Brent and WTI, rebounding from earlier worries about China’s economy and U.S. interest rates. Saudi Arabia is expected to continue cutting oil production, potentially tightening inventories.

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