S&P 500 futures rose 0.21% to 6,492 points
on Monday, nearly recovering Friday’s losses but still needing to clear 6,503
to fully erase them. The rebound comes against a backdrop of caution among
large investors.
Friday’s U.S. labour market report provided a
textbook case for dovish expectations. Nonfarm Payrolls increased by only
22,000 in August, well below the 78,000 forecast, marking the weakest reading
since October 2024 and the second consecutive decline. Unemployment ticked up
to 4.3% from 4.2%, leaving little doubt about labour market cooling. Markets even
revived the possibility of a 50-basis-point rate cut by the Federal Reserve in
September, now priced at 10%. Standard Chartered has already positioned for
this outcome.
Yet institutional investors appear
unconvinced. The SPDR S&P 500 ETF Trust saw a $2.06 billion outflow last
week, reversing a $4.4 billion inflow earlier in the week. The data suggests
institutions bought aggressively into Tuesday’s drop, with $7.0 billion of
inflows in a single day, but then used the rebound to reduce exposure. Over the
past five weeks, net outflows have dominated, totalling more than $18 billion.
This pattern indicates that large investors are viewing the labour market
slowdown as a risk rather than an opportunity, raising the likelihood of a
correction from the 6,500–6,600 range.
The market is unlikely to see sharp declines
ahead of next week’s Fed meeting, but institutional selling could accelerate
afterward, particularly if expectations for a 50 bp cut gain excessive
traction. August inflation data will be a key driver this week. The Producer Price Index is due Wednesday and
the Consumer Price Index on Thursday, with Wall Street expecting CPI to rise to
2.9% YoY from 2.7%. A softer print would strengthen the
case for a larger cut, potentially leaving equities overbought before the Fed
meeting, while hotter inflation could undermine the 50 bp scenario and restore
balance to the Fed’s policy outlook.
The European Central Bank (ECB) is expected to
hold rates steady on Thursday. The decision will be
interpreted in light of ongoing political instability in France and fragility
in the Eurozone debt market, with Christine Lagarde’s comments closely watched.
Heightened volatility in European markets is likely.
Technically, the S&P 500 remains within
the 6,500–6,600 target range, with immediate resistance at 6,510–6,530. A
breakout could extend gains to 6,610–6,630, but this would bring the market to
a decision point between a renewed rally toward 6,850–6,950 or a meaningful
correction. Near-term support is at 6,410–6,430.
Brent crude prices remain in a technically
unfavourable phase, hovering in the $66.00–$68.00 support zone at $66.91. OPEC+
has announced a modest October production increase of 137,000 barrels per day,
a sharp reduction from September 555,000 bpd hike. The support of the
$66.00–$68.00 remained intact. The next resistance lies at $76.00–$78.00. The
following support is at $56.00–$58.00.
Gold prices have broken above resistance at $3,430–$3,450 per troy ounce,
reached the primary target of $3,500–$3,600, and set a new all-time high at
$3,617 per ounce. The current level is $3,610. Whether
prices can rise further is uncertain. The market is experiencing extreme
overbought tension. Immediate resistance
lies at $3,630–$3,650. Investors' reaction in this zone will be critical.
In the currency
market, the U.S. Dollar is retreating. The
EURUSD is trading above the resistance at 1.17000 and is now retesting it. A sustained break above 1.17000 would activate a major move toward the
extreme target of 1.19500–1.20500. If the retest fails, a pullback to 1.16000
is likely.