This first trading week of September was full of surprises. Confusing PMIs in the United States resulted in a deteriorating sentiment in the market, while Chinese authorities banned Apple products to be used during working hours by employees of state-owned firms and government agencies.
The efforts of China’s authorities to limit country’s dependence on foreign technologies and commitment to national security priorities was not accidental move as China Mobile, the largest Chinese mobile operator, announced it will refuse to sell the iPhone 15 in the domestic market. These moves could be considered as a response on U.S. Administration sanctions on China’s high-tech sector. Apple stocks wend down by 3% immediately on Thursday and may continue to decline at the opening on Friday. The Q2 2023 corporate report presented by Apple highlighted significant dependence of Apple’s expansion on China’s market. This may hammer the U.S. stock market in general consider Apple’s heavy weight in major stock indexes.
PMI readings this week were quite controversial as Markit reported Service Sector business activity down to 50.5 in August from 52.3 points in a previous month. S&P Global Composite PMI was also down to 50.2 from 52.0 points. These figures point to lower inflation and cooling of the U.S. economy. On the other hand ISM reported its August Service sector PMI up to 57.3 from 57.1 in July. It also reported Non-Manufacturing Employment at 54.7, up from 50.7. This a completely different data that is rather pointing to a possible increase in inflation. This data is also not consistent with the official unemployment level that went up to 3.8% in August from 3.5% in a previous month.
Curiously, investors have accepted ISM figures as the most reliable pushing debt yields almost to the highest levels since 2007. The S&P 500 broad market index lost 1.8% on the news, while the U.S. Dollar strengthened to the maximum since June. Investors have reconsidered chances for another interest rates hike by the Federal Reserve (Fed) in November to 40% from 34% in the beginning of the week. If this situation will develop the chances may increase above 51%, and that could lead to a continuation of the correction in the stock market in September. This is likely to lead to slow down in inflation, and may eventually result to a lower chances for interest rates hike for the same November.
The U.S. government shutdown story is also adding tom the negative tunes in the market. The first deadline of this shutdown is set on September 30. This show seems to be promising.
Investors will be focused on August inflation data in the United States, while European Central Bank (ECB) will decide on its further interest rates move. Both events are very important, and could push markets in either direction.
Technically, the S&P 500 index continues to have an upside formation with a primary target at 4700-4800 points. The index is traded below the resistance of 4510-4530 points. If it will climb above this level, the next target at 4610-4630 would become available.
Brent crude prices broke through the resistance at $83.00-85.00 per barrel, they are moving towards $93.00-95.00 per barrel. If prices would dive below $83.00 a primary downside scenario with a support at $74.00-76.00 per barrel will be initiated. If prices would fell below $74 per barrel a recession scenario with targets at $64-66 per barrel of Brent crude will be the option.
Gold prices are moving inside the mid-term upside formation with targets at $2000-2100 per troy ounce that have already been met. But, the situation has changed dramatically as the important support level of $1980-2000 per ounce was smashed. The nearest support is set at $1890-1910 per ounce. Prices are regularly visiting this level. So, it would be better to be prepared for a downside, and opening short positions after a downside breakthrough of the support and retest of it.
A strange strengthening of the Greenback continues. A risky long trade with a small amount for GBPUSD from 1.27200-1.27400 with a target at 1.29400-1.29600, and the stop-loss at 1.25300 was closed with a loss. A long trade in the AUDUSD from 0.63800-0.64000 with a target at 0.66500 and the stop-loss at 0.63200 remains open.