US and European futures are trading lower on the final trading day of this month. Overall, this month has been decent for the US and European stock indices as we have seen decent gains. So far this year, one theme is pretty clear: traders have considered every single selloff as an opportunity to bag some bargains, and this is why we are looking at strong year-to-date performance for all the three major US stock indices. There is no doubt that investors have become more comfortable with the fact that loose monetary policy isn’t going to stay here forever. As long as the Fed responds according to the economic data, economic growth is only likely to strengthen.
After the Jackson Hole event last week, the main economic event that matters the most for traders this week is the US Non-farm data due on Friday. Last week, we learned one thing very clearly that the Fed Chairman is less hawkish than other Fed members who want to begin the tapering process as soon as possible.
The upcoming economic data, the US NFP, is going to create more pressure on the Fed Chair, Jerome Powell if the numbers show that the US labour market has strengthened further. Nonetheless, the smart money isn’t expecting any tapering until the end of this year, and as long as things continue to remain like this, the chances are stock markets may score more gains.
In terms of the economic docket, we do have the US Pending Home Sales data, which will be hitting the tapes at 14:00 GMT. Traders are expecting an improvement in this number, and the forecast is for 0.5%, while the previous reading was for -1.9%. Given the fact that it has become clearer that the surge in inflation is transitory and the Fed is no rush to increase the interest rates any time soon, the probability is that the US housing market may continue to improve further. A strong reading for the US Pending Home Sales could help the Dow Jones index to move even higher, and the index may end up closing the month with a nearly 2% gain. So far this month, the Dow Jones index is up 1.5%, while the S&P 500 index has surged 2.6%, while the Nasdaq index has once again outshined both with a gain of 3.1%.
In the commodity space, oil prices are giving up some of their gains as the Gulf of Mexico prepares to shut down due to the powerful hurricane. Last week, we saw oil prices surged by over 10%, but now traders have become more concerned about the upcoming hurricane. The reality is that it is not easy to predict that how much damage each hurricane will create.
This generates uncertainty among oil traders in terms of oil supply and demand. It is possible that the current selloff in oil prices could be the opportunity for those who have been waiting on the sidelines throughout the last week while oil prices were scoring significant gains. But this opportunity could only be under that scenario if we do not see any major due to the hurricane in the Gulf of Mexico.
As for gold prices, the price is trading firmly above the 1,800 price mark, which is bullish for the precious metal. Traders are looking at the 100-day SMA as the last meaningful resistance before the rally picks up more momentum. The surge in gold prices is primarily because traders know that the Fed isn’t going to increase to interest rate anytime soon, and there are strong chances that the tapering process may only begin at the end of this year. This particular narrative has brought weakness in the dollar index, which is helping the gold prices.