Investors Eye GDP & PCE Data As Rate Hike In Doubts

Stocks rebound on Tuesday as China continues to ramp up stimulus and US data puts rate hikes in doubt. The US CB Consumer Confidence Index fell from 114.0 to 106.1, a three-month low. Additionally, the JOLTS Job Openings for July fell to 8.83 million vacancies, which is 340,000 less than the previous month and the lowest since May 2021. The data points to an economic slowdown, which is not favourable for the stock market in the longer term but means interest rates are less likely to rise. Therefore, investors essentially trade based on interest rates rather than the economic condition.

China’s largest banks also plan to lower mortgage and deposit rates. The move is designed to trigger economic growth as data points to a global slowdown and economists trim China’s growth forecasts. The fiscal stimulus is positive for the stock market as it supports investments and consumer demand. However, if economic data continues to disappoint, for example, today’s Gross Domestic Product, stock valuations can rise. Analysts have advised investors are ideally looking for the thin line between avoiding a recession and further rate hikes. 

The NASDAQ was the best-performing stock in the US stock market, rising 1.74%, followed by the S&P 500, rising 1.45%, and the Dow Jones, rising 0.85%. European equities are also experiencing similar price action; the DAX rose 0.97% and the CAC40 0.69%. However, European equities will depend mainly on today’s German and Spanish inflation data. European investors are specifically keen to see Germany’s new inflation rate as the rate continues to remain three times higher than the European Central Bank’s target. 

EUR/USD - Fed Rate Hikes in Doubt

The EUR/USD exchange price rose to its highest level since August 22nd and is now trading at the average of the previous price range. The bullish price movement was primarily a result of the US Dollar decreasing in value. However, the Euro also performed well against most currencies. This morning's price is witnessing waves in both directions as the US Dollar attempts to form a direction. A sell signal will materialise if the price declines below 1.08614, indicating a more significant retracement. A retracement can aim for a price decline to 1.08403.

EUR/USD 10-Minute Chart on August 30th

The US Dollar Index is trading 0.09% higher this morning but continues to show signs of weakness. The price on Tuesday fell from 104.33 before the JOLTS Vacancies were released to 103.44 this morning. The value of the US Dollar fell as investors priced into the market no further rate hikes and a potential pivot in 2024. The price of the Dollar also was affected by a rise in the market’s risk appetite. For the US Dollar to retain the bullish price action previously seen, the currency must see a higher-than-expected GDP figure this afternoon. Analysts expect the GDP figure for the quarter to read 2.4% and the GDP Price Index to 2.2%. If both figures read higher, the US Dollar may attempt a correction.

The Euro, on the other hand, is increasing in value against all currencies, including the Dollar, Pound, Yen and Swiss Franc. The Spanish Consumer Price Index supports the price, which rose from 2.3% to 2.6%. Previously, analysts were expecting 2.4%. In addition to this, the largest German state has surprisingly confirmed a jump in its monthly Consumer Price Index. If the remaining states also confirm higher inflation, the Euro will potentially be supported by a need for higher rates. European Indices, on the other hand, may decline. 

It is also worth highlighting the comments from the French Finance Minister, Mr. Le Maire, who is advising he does not expect rate cuts from the ECB over the next six months. If the price rises above 1.08717 and crossovers are formed by Moving Averages and the Stochastic Oscillator, many technical analysts will consider a buy signal. 

NASDAQ - Investors Focus on GDP and PCE Price Data

The price of the NASDAQ significantly rose on Tuesday, forming a bullish impulse wave measuring 2.45% without forming any major retracement. The fact the price rose with no retracements has caught the eyes of technical analysts. However, the price is retracing during this morning’s Asian session. This morning's decline is more significant than traditional waves seen during the current session, and short-term traders need to monitor these smaller price changes. However, the price can still change depending on today’s GDP release and, more importantly, tomorrow’s PCE Price Index. 

Even though the US CB Consumer Confidence Index and Job Vacancies fell, interest rates are still possible if inflation rises. The US will release the PCE Price Index tomorrow, which analysts expect to remain at 0.2%. If inflation continues to increase while economic conditions deteriorate, the stock market can experience significant declines. The central bank will be forced to raise rates even though consumer demand weakens. For this, investors will concentrate on tomorrow’s PCE Price Index and the US CPI later in September. 

All stocks are trading higher when monitoring the top ten influential stocks within the NASDAQ over the past 24 hours. During after-hours trading, nine of those stocks are trading higher and only Tesla has declined after-hours. The NASDAQ is trading above trend lines and the Volume Weighted Average Price, which indicates buyers are currently in control. However, the price is retracing this morning and has formed a downward crossover on the 1-hour chart. Therefore, the NASDAQ is receiving indications of a retracement, but this may change as we get closer to the US trading session this afternoon.

NASDAQ 10-Minute Chart on August 30th

Summary:

• Stocks rebound on Tuesday as China continues ramping up stimulus and US data puts rate hikes in doubt.
• JOLTS Job Openings for July fell to 8.83 million vacancies, which is 340,000 less than the previous month and the lowest since May 2021.
• Investors focus on the US Gross Domestic Product and tomorrow’s PCE Core Price Index. 
• The Spanish Consumer Price Index supports the price, which rose from 2.3% to 2.6%. Previously, analysts were expecting 2.4%. The first German CPI data is slightly higher than previous expectations.