The global stock market took another downward per previous indications, with the NASDAQ declining 1.22% in just 3-hours. The global stock market also continues to decline this morning during this morning’s Asian market. The market is showing an apparent “risk-off” sentiment ahead of the UK’s inflation data, but more importantly, tonight’s Fed interest rate decision. Currently, the market is pricing a pause for tonight’s meeting but a 0.25% hike in November, which is why the stock market is declining. Investors also note that higher commodity prices will likely keep inflation “higher for longer”. Though, investors should also note that the trading conditions have been changing since the release of the UK inflation rate.
However, the price of Oil has fallen after renewing its yearly highs for a second consecutive day. The price of Crude Oil rose 1.45% to $92.246 before collapsing to the lowest price since Friday. This again results from the market’s “risk off” appetite. The latest bearish impulse wave is measuring a whopping 3.33%. Even though the commodity is being supported by supply restrictions from the OPEC group alongside a resilient market and the Chinese recovery, it is vital to remember that higher interest rates can pressure the price.
The Canadian Dollar remained the best-performing currency when looking at the currency market. However, as in yesterday's market analysis, the money also retraced and saw buying pressure return. The Canadian Dollar also continues to see price action strongly linked to the price movement of Crude Oil. The price of the Canadian Dollar is trading slightly lower this morning, but if the currency gains 0.10-0.11%, buy signals are again likely to form. This morning, The US Dollar Index is trading slightly lower, and the Pound has been the best-performing currency over the past 3-hours until the UK released its inflation data; for Pound analysis, scroll lower.
SNP500 - Investors Turn to Fed Rate Decision
The SNP500 ended the day 0.27% lower than the market open but fell 0.95% before retracing upwards. The upward price movement towards the end of the day was due to buyers re-entering the market, taking advantage of the lower discount price. Again, as spoken about yesterday within the market analysis, the SNP500 has been trading within a price range that is well established. Therefore, any breakouts can be corrected back to the range. However, after this evening’s rate decision and forward guidance, the market may change the pricing of the SNP500 and its price.
A positive factor for the stock market, globally, not only for the SNP500, was the inflation data in the UK. The UK inflation data shockingly fell from 6.8% to 6.7%, whereas other nations are witnessing rising inflation. The softer data indicates that the Bank of England may pause instead of a hike, and the Fed may even take a softer tone. Economists advise commodities are on the rise, but inflation can still fall if demand and consumer confidence are low. The SNP500 rose 0.11% within 5 minutes after this morning’s UK Consumer Price Index.
Only three rose in value from the top ten influential stocks within the index during yesterday’s trading session. This was Apple, Tesla and Meta. However, the remaining seven declined during the trading session. The question is whether this market’s appetite is likely to change now UK inflation is trading lower and if the Fed takes a softer view.
One of the stocks that substantially rose during the pre-market session is Visa. Visa is the 14th most influential stock within the SNP500, holding a weight of 1.053%. Investors, in the longer term, should be monitoring the clash of horns within the company. Discussions continue on a recent initiative proposed by the company to allow shareholders holding Class B shares to convert them into Class A shares. Experts believe that even a complete conversion will not significantly decrease the value of class A shares. However, conservative investors are voicing concerns and are afraid of a sell-off after conversion. Visa stocks this year so far have risen 17.50%.
If the price rises above the $4,451 market or the 100-bar moving average, the index will likely see bullish signals form. However, it is essential also to ensure the Fed is not providing contracting factors. This morning's price rose after an initial decline and is trading above the VWAP. For downward signals, traders can monitor bearish Crossovers.
GBP/USD - UK's Unexpected Inflation Dip
The Pound started the day off strong, but the UK’s Consumer Price Index has sent the Pound downwards against all currencies. The Pound declined almost 0.50% over the past 1 hour. The inflation rate is the lowest since March 2022, and is one of the few nations to experience a declining inflation rate in August. The market’s reaction has been so strong because most members of the G7 are experiencing rising inflation, and the UK shockingly has seen their decline.
This indicates two negative factors: the Bank of England may potentially consider a pause, and consumer demand is lower. Rising commodity prices and inflation in other nations, while UK inflation has declined and indicates demand is lower than previously thought. Therefore, a recession is potentially upcoming. As a result, the Pound is falling. However, the bearish impulse wave is significantly larger than traditional price movements. This can trigger retracements or corrections in the short term. If the price returns to the previous price range, traders should be cautious of another potential decline.
Summary:
- Global stocks decline but receive a boost from UK inflation which reads significantly lower.
- The Pound declined almost 0.50% over the past 1 hour. The inflation rate is the lowest since March 2022, and is one of the few nations to experience a declining inflation rate in August.
- Currently, the market is pricing a pause for tonight’s meeting but a 0.25% hike in November, which is why the stock market is previously been declining.
- The SNP500 forms a breakout but retraces back to the previous price range. Investors turn their attention to tonight’s Federal Reserve Rate Decision.
