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🧽The calm before the storm: The Fed and Markets🕹

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Equity markets stabilised after a stormy Monday as all eyes are on the Jackson Hole Friday conference, which could provide volatility to the market. The recent sell-off is built on the premise that the Fed isn’t ready to pivot to the easing side despite signs of economic demand falling. 

The combination of inflation worries, an aggressive tightening and a possible recession drown risk-on sentiments. Nevertheless, what Uncle Powell speaks in his tone will set the momentum for global markets in the following weeks. 

🧸Will he be in a dovish tone?💊

On the flip side, it could be that the Fed speaks nothing meaningful. If that is the case, investors might be more inclined to look at the home sales and durable goods order data coming this week. 

Moreover, Uncle Powell has always been on the higher rate until inflation cools. He is not likely to switch to a new melody and end the music chair game. 

💈Economy shows sign of weariness📈

Recent economic data does show that the economy is on a path of slowing. The PMI data is weaker than analysts expected, and the manufacturing PMI data fell to 51.3 from 52.2 in July. Services fell sharply to 44.1 from 47.3, much lower than the 49.8 expectation. New home sales in July also tumbled 12.6%, far off from the forecast fall of 2.5%. 

Such data should be music to Powell as part of the intended effect of the monetary tightening policy. 

🧨Pika World’s Outlook🔭

We continue to see the global economy in a milky state. Growth concerns are likely to remain. In Europe, the worsening energy crisis is flipping across the region. In Asia, China’s economic activity showed persistent cracks, but we expect targeted policy support towards a steady hand recovery, yet the road is undoubtedly bumpy. 

🛎What’s on the menu today?🔦

At 10 pm, we will have the pending home sales, and we expect a fall of 4%, much smaller than a prior period of 8.6% fall. 

It is 24 Aug, Wednesday at 8.50 am in Singapore and 8.50 pm in New York. Pika World wishes all friends a moonatic week ahead.

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