Market Update

There was a palpable sense of anticipation in the office this week, as we awaited Jay Powell, the Fed Chair, to address the annual Jackson Hole symposium earlier today (at 3pm UK time).
Recent chatter from Fed policymakers hinted at a possible tightening of monetary measures, leading to widespread speculation on the initiation and velocity of tapering QE (their bond-buying program), and potential US interest rate hikes. This added a layer of uncertainty to market dynamics.
Oftentimes, such events, despite the buildup, don't quite live up to the hype. However, today was an exception, and to us, it sounded just right!
Jay Powell not only confirmed plans to initiate tapering of the Fed’s monthly $120bn QE program within the year but also assured that such measures would be gradual and grounded in tangible economic data.
Crucially, he emphasized that tapering QE shouldn't be interpreted as an imminent signal to raise US interest rates. This resonates with our long-held belief, frequently shared in our commentaries, that a US interest rate hike isn't on the immediate horizon. Undoubtedly, this stance augurs well for global equity markets.
In the coming week, our attention will be directed at OPEC’s production assembly on Wednesday (1 September 2021) and the US employment statistics on Friday (3 September 2021), which encompasses metrics such as non-farm payrolls, unemployment and participation rates, and average earnings. Both events could significantly influence the Fed’s dual objectives related to inflation (influenced by oil prices) and employment (especially considering potential setbacks from the rapid spread of the Delta variant).
Other notable data releases to watch include US ISM figures, US manufacturing orders, retail sales data from the Eurozone & Japan, Eurozone CPI, Chinese PMI, and Japan's industrial output metrics.