All eyes on Uncle Powell

The equity markets ended lower ahead of the virtual Jackson Hole meeting, where market participants are waiting for comments from Uncle Powell.

Initial Jobless Claims remain at a low end of 353,000, reflecting a healing labour market. Stock markets had been on a roller coaster ride after a quick sell-off last week and hitting new highs this week.

The profit-taking and little risk-off sentiment are expected ahead of the Fed event and consolidation of gains.

Treasury Yield remains Firmer

Essentially, our ears will be with Uncle Powell as he is expected to share hints on the possible bond-buying program direction. The strengthening of the economy has led many to believe that tapering is arriving finally despite the Delta variant complicating the initiative.

The firmer treasury market suggests that people expect a gradual tapering process instead of a fast pace withdrawal of stimulus.

Special Highlight: The European Economy

STOXX 600 index and Germany’s Dax had fallen, leading most of the European bourses to decline. One reason is a survey that shows German consumers are less optimistic about the future after a recent survey that reflects similar pessimism seen in German businesses.

It does not help that Deutsche Bank, Germany’s largest private lender, tumbled 3.1% on NYSE after WSJ reported that its management arm DWS Group has now been investigated over possible claims that it overstated efforts to tap onto sustainable investing criteria as a way to manage its asset. This leads to DWS Groups collapsing by nearly 14%.

Pika World favours exposure to the European equities given a less inflationary environment and early recovery phase.

HP Inc.: A Display of Inventories Run-down

It is an exciting review of HP Inc results which were mixed. While they had achieved better than estimated profit, there is a huge miss on the top-line as the PC and Printer business struggled to meet the roaring demands due to the chip shortages.

As the CEO had mentioned, they would expect revenue to be better if they had enough components to meet the demand. HP’s issue isn’t the processors or memory but the relatively cheaper components of integrated circuits like controllers. The company projected that such a shortage is likely to persist into early 2022.

Thus, Pika World believes this earning season had shown that the supply constraints are caping earnings growth. Therefore, it is likely to persist, and the equity market may reflect a new reality of such a corporate environment.

What’s on the Menu Today?

It is the last day and the most important day of the week.

At 8.30 pm, we will receive the Core PCE Price Index on a Y-o-Y basis which we expect 3.6% compared to 3.5% for the prior period.

At the same time, The Personal Spending on a MoM basis is expected to climb 0.3%, lower than the 1.0% seen in the previous period.

10 pm bring us to Michigan Consumer Expectations which we expect a sharp decline to 65.2 from 79.0.

At the same time, Uncle Powell is expected to speak at the Jackson Hole Symposium and the market is expected to be volatile.