Three Markets to Watch Next Week

The Federal Reserve kept interest rates unchanged, although Kevin Warsh himself sought to maintain a hawkish stance while not suggesting that rate hikes are expected anytime soon. The final days of July also brought a distinct improvement in sentiment across the technology sector, coinciding with financial results publications from major Big Tech companies. The Middle East situation remains a critical risk factor, even as OPEC+ countries attempt to restore as much commodity volume to the market as possible. This week, investors will analyze earnings reports from additional major companies, including recent market entrant SpaceX. Beyond this, a full marathon of economic data from the United States awaits, culminating in the cherry on top: the US labor market NFP report. Consequently, investor focus should center on markets such as US100 (Nasdaq 100 futures), USDJPY, and Brent Crude Oil.

US100 (Nasdaq 100 Futures)

This coming Tuesday (August 4), following the Wall Street closing bell, SpaceX will release its financial report for the first time since going public. These results will provide a strong boost to sentiment surrounding the high-tech sector. However, SpaceX is not the only crucial earnings release for Wall Street this week, as reports are also expected from companies such as AMD, Palantir, Uber, and Cloudflare. Index and futures quotes will be shaped by a series of key readings from the American economy. Early in the week, the ISM manufacturing index will be released, followed by the JOLTS report on Tuesday, the ADP reading and ISM service index on Wednesday, and weekly jobless claims on Thursday. The flagship event from a macroeconomic calendar perspective will be Friday’s labor market report from the United States. Forecasts indicate moderate employment growth of 65 thousand (resulting from the expiration of temporary employment following the world cup) alongside a slight rise in the unemployment rate to 4.3%. A weaker reading would support a less hawkish stance from the Fed and could fuel further gains for technology stocks.

USDJPY

The USDJPY currency pair registered a steep decline on the final Thursday of July following currency intervention, verbal support from the United States, and hawkish remarks from Governor Ueda after the decision to hold interest rates steady. Nevertheless, the pair remains firmly anchored near the 160 level, which previously served as resistance and now acts as support. This week, the primary catalyst for movement will be the behavior of US Treasury yields in response to US labor market releases (JOLTS, ADP, and NFP). On Wednesday (August 5), minutes from the June Bank of Japan (BOJ) meeting will be published. Although this report is significantly delayed, it could shed light on Japanese policymakers’ stance regarding future interest rate hikes and the second round effects of high energy prices on core inflation. If Friday’s NFP data confirms a rise in US unemployment to 4.3% alongside modest job growth, downward pressure on the dollar combined with hawkish notes in the BOJ minutes will create conditions for renewed strengthening of the yen.

Oil (Brent Crude)

Given the tight conditions in the fuel market, OPEC+ is striving to restore as much oil to the market as possible. Although recent increases in production targets were visible only on paper, a gradual rise in output is occurring, even with the Strait of Hormuz partially closed and heightened tension in the Bab el Mandeb Strait. Last week, market anxieties resurfaced due to the resumption of military strikes involving Iran. Persistent geopolitical tensions in the Middle East generate a risk premium, while a potential escalation of military operations poses a direct threat to transit routes and supply stability for the commodity. For commodity valuations, today’s US manufacturing ISM figures and Friday’s foreign trade data from China will be important. The projected double-digit expansion in Chinese exports (+24.5% year over year) driven by global demand for AI equipment could provide a powerful demand boost for the energy market.

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