After an initially strong start to September, US stocks stalled last week followed a major tech sell-off. Where will they go next?
US: Tech stocks wobble
Poor Dow Jones. It came within 400 or so points of the all-time highs it struck in February, only to tumble more than 800 points last Thursday night, joining the Nasdaq and S&P in a rapid downturn.
There didn’t seem to be one specific reason behind the shock reversal, bar investors all of a sudden losing their bottle in the face some incredibly pricey tech stocks. This combined with the related concerns over the impact the US-China trade war will have on the sector and the still alarming unemployment situation domestically. Not to mention the US election which is now – somewhat unbelievably – only 2 months away.
The big question is, will the Dow Jones resume its path towards its record peak, or will it start to move in the other direction?
After resting up on Monday for Labor Day, the index is facing a fairly quiet week data-wise, with consumer credit figures on Tuesday, JOLTS job openings on Wednesday, PPI on Thursday and inflation on Friday.
One major development that could strap the rocket back on the Dow, and the rest of the US indices, would be a bipartisan covid-19 spending plan from the Republicans and Democrats. Treasury Secretary Steven Mnuchin said one was still possible, giving the markets a pop; however, there didn’t seem to be anything of substance backing up his comments.
Similarly, the markets are always receptive to vaccine headlines, last week climbing on the suggestion that one could be rushed out before Christmas. Further remarks to the same effect will be welcome.
UK: Pound relationship with the dollar
The UK saves all of the real tasty data until the end of the week. On Friday there’s the monthly GDP reading – which was 8.7% at the last count – alongside the construction output, goods trade balance, and industrial and manufacturing production readings.
Before that, there’s the Halifax HPI on Monday, and the NIESR GDP estimate on Thursday.
As for how the FTSE performs, it will likely be influenced by the relationship between the pound and dollar, and whether or not the former resumes its climb against the latter.
Eurozone: Economic data
The focus for the Eurozone this week is Thursday’s ECB meeting, which will not only see a fresh set out projections from the central bank, but attention paid to any messaging around what Christine Lagarde and co. have planned in the coming months.
Elsewhere there is German industrial production on Monday, German and French trade balance and the region-wide GDP reading on Tuesday, French and Italian industrial production on Thursday, and the start of the latest Eurogroup meetings on Friday.
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