Market Recap 8/31

Global equity market:

(Source: KVB PRIME)

Equity market:

Affected by the Fed's announcement to adjust the policy framework, the three major stock indexes rose further on Friday. Among them, the Dow rose 0.57% to 28,653.87 to recover all the decline this year, the S&P 500 closed up by 0.67% at 3508.01, and the Nasdaq closed up 0.58% at 11995.85. Furthermore, aviation stocks, cruise stocks and gold stocks ranked are the top gainers.

European stocks were generally weak. The German DAX index closed down 0.48% at 13033.2, and the UK FTSE index closed down by 0.61% at 5,963.57.

In terms of A-shares, the three major stock indexes oscillated higher in the morning and accelerated their upward movement in the afternoon. As of Friday's close, the GEM registration system rose 4.76% in the first week; the Shanghai Stock Exchange Index closed up by 1.6% on Friday, rising above 3400. On the disk, Shenwan's 28 first-level industries rose across the board, led by consumer sectors such as catering, tourism, medicine, home appliances, food and beverage, and securities stocks strengthened in the afternoon.

Precious metal forward contracts:

Gold opened low and moved high on Friday. It continued to rise during the Asian and European trading hours, which rose by nearly $40 at a point; the US market began to consolidate, mainly around the 1960s, and finally closed up by 1.81% at 1963.79.

The trend of silver is similar to gold. The European market pulled up, with the highest increase of more than 2% in the day, closing at $27.49 per ounce. After the opening of the market on Monday, gold and silver continued to be strong. Gold stood at 1970, and silver rose by more than 2%, breaking through $28.

Crude oil forward contracts:

WTI crude oil fluctuates little during the day. Although the US traded higher for a short time before the market, it fell back soon afterwards, and finally closed slightly by 0.17% at $43.34 per barrel;

The oil distribution trend was even stronger, with a gap in the early trading, opening up nearly 1%, and then showing an overall upward trend, eventually closing up 1.62% at $45.81 per barrel.

Currency forward contracts:

USDX: closed down at 92.27 -0.785%

EUR/USD: closed up at 1.19028 -0.703%

GBP/USD: closed up at 1.33489 -1.148%

AUD/USD: closed up at 0.73631 -1.420%

NZD/USD: closed up at 0.67378 -1.485%

USD/CAD: closed down at 1.3094 -0.211%

USD/JPY: closed down at 105.354 -1.113%

Global fundamentals:

United States

Harker predicts that the US economy will decline by 5-6% this year, and the unemployment rate will be around 9%; the unemployment rate will be around 7% and the GDP growth rate will be around 3% next year. He believes that the Fed is seeking to slightly exceed inflation rather than overheating.

The US Security and Environmental Enforcement Agency stated that currently the US Gulf Area still has 1,290,600 barrels of crude oil production capacity closed, accounting for 69.76% of the Bay Area’s total production capacity. However, energy companies have begun to re-deploy employees to offshore facilities in the Gulf of Mexico, and 171 of the 310 platforms where employees have previously evacuated have been redeployed.

Brad predicts that the US GDP will grow by 20% in the third quarter of 2020, or the largest GDP growth in US history, and continue to grow in the fourth quarter and 2021. Brad emphasized that the Fed will work hard to make up for the mistakes made in the past on inflation, and policy changes will help make up for the shortcomings of inflation.

Europe:

The British government said on the 28^th that it intends to adopt a series of new measures, including amendments to relevant regulations, to allow regulatory agencies to temporarily authorise the emergency use of the COVID-19 with proven safety and effectiveness. The public consultation will start immediately for a period of three weeks. If all goes well, the changes will take effect in October.

Today's currency forecast analysis:

GBP/USD

UKCentral bank holds positive expectation towards first economic while trading agreement between EURO and UK seems to be nearly done. Despite central bank still indicated negative interest rate might apply, GBP went strong and rise 1.148%, creating a new record of intraday boost. But for today’s layout, creasing high is not valid. Price will reconsolidate to 1.330 as first target. Please apply strict risk control due to call back. 

(Source: KVB PRIME)

AUD/USD

Commodity price keeps pumping while USD went weak. All lead to stronger AUD. The price broke through 0.724 which is 2019 pervious high. We consolidate current price is over bought. Creasing high is not recommended, while participation in call back targeting day average is valid. More aggressive target could be 0.73. Please apply strict risk control due to call back. 

(Source: KVB PRIME)

XAU/USD

We have underestimated last week market reaction towards FED dovish speech. Last trading day of last week, capital marched into market. Gold price compared to currencies which lays strong fundamental such as UK and Japan, is far too aggressive. While GBP/USD pumped 1.148% and USD rise 1.13% and USDX drop 0.785%, gold rise 1.81%. It proves our conclusion above. Currently, lay out is longing Gold. But open position after price reconsolidates back to $1950 is better. Profit margin sets as $12-16. Please don’t be greedy.

(Source: KVB PRIME)

US Dollar Index

The Fed’s previous dovish remarks continued to ferment. At the same time, after Abe’s resignation on Friday afternoon, the major component of the US dollar index: the yen rose sharply, adding to the large fall of the US dollar index, although the Federal Reserve issued an estimation of 20% growth in US GDP in the third quarter of 2020, and continue to grow in the fourth quarter and 2021. However, the market is not paying the bill. The US dollar index has currently set a new lowest level and has not strengthened as we expected before the election. From a technical perspective, the US dollar index needs a correction today and the target is around 92.45. After that, you can continue the short position.

(Source: KVB PRIME)