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Optimistic Start For Stock Futures


2 August 2021

The first trading day of August is starting with positive momentum; both European and US futures are trading higher today. European and US stock indices have scored a stellar performance so far this year, and we have seen decent gains on a month-on-month basis. Most of these gains are purely due to the presence of the loose monetary policy. In addition to this, we also had ample support from fiscal policies as well.

As always, the biggest threat for the stock market is a taper tantrum, and that is what may happen to the stock market when these support measures are withdrawn. This is a topic that keeps many traders awake at night despite the fact that we have seen the taper tantrum occur a few times since the financial crisis, which happened in 2007.

Bi Event For Markets and Gold 

One event which is going to set the tone for stocks and gold will be taking place this week, and that is the US NFP data. The number will be released Friday, and it is going to influence the Federal Reserve’s monetary policy. If we look at the market expectations, most of the traders believe that this month we are going to get a strong number, and there is a strong possibility that we will get a reading which will be over one million. Of course, such a number will send a very bullish message, and the Fed will have no choice but to adjust the market expectations, i.e. to send a hawkish message.

A strong number is more than likely to push the dollar index higher, which means we could see the gold prices retracing from their highs. However, if the number disappoints, a likely chance given the fact that Delta cases are on the rise, we could be looking at a completely different situation. It is important to mention that America’s top scientist, Dr Fauci, has said that the US doesn’t need another lockdown despite the fact that Covid numbers are on the rise. Nonetheless, a feeble reading of the US NFP could break the back of the dollar index, and as a result, we could see the gold price surging.

Earnings Season 

The US corporate earning numbers will continue to come out this week, and this will be another factor that is likely to influence the market’s price action. Nearly 59% of the S&P 500 have already reported their earnings for Q2, and nearly 88% have surprised investors by beating the estimates. This week, we are going to hear from the likes of Uber, CVS Health, General Motors, Roku, Square, Lyft, Amgen, and many others.

Oil 

Oil prices are failing to see any recovery as investors are concerned about China’s economic recovery and the increase in oil supply, which is highly likely to be announced next week when OPEC members will meet. There is no doubt that oil prices have been supported by keeping the oil supply in check. But traders are worried that OPEC members are ignoring the fact that oil prices at the current level are highly motivating US Shale Oil producers to drill more oil. Although, last week, we saw the US inventory data showing a shortage of oil, and that helped the oil prices to move higher once again.

When it comes to OPEC meetings, it is widely anticipated that its members are likely to increase their oil production at every single upcoming meeting, and this is keeping the lid on the oil prices.

Bitcoin 

The crypto king didn’t really see any colourful price action over the weekend. Yes, we did see the price breaking above the 40K, but the follow-through failed to materialise yesterday. This particular aspect is very much in focus among traders and investors, and this is the reason that we are not seeing positive price action for Bitcoin today. However, this doesn’t mean that Bitcoin’s price isn’t going to move higher; it is really positive that we have seen the Bitcoin price moving above the 40K price level as this has encouraged bulls that they can continue to push prices higher today.   

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