What to Watch Across Markets This Week: August 5, 2024

What to Watch Across Markets This Week: August 5, 2024

• OPEC may "pause or reverse"
• Sahm Rule gets triggered
• Earnings Releases to Watch for this Week
• RBA expected to keep rates steady
• Chinese Inflation data showing signs of improvement in economic activity

Market Recap: Last Week Highlights

Last week was filled with significant events. We'll take a closer look at what happened during the OPEC-JMMC Meetings and examine the labor data released in the U.S.

OPEC-JMMC Meetings Summary

On Thursday, August 1, 2024, the OPEC-JMMC Meetings took place to discuss slowly increasing oil production, which they had stopped since 2022 to keep prices high. The group, led by Saudi Arabia and Russia, decided to continue with their plan to start increasing production in the fourth quarter of this year. However, they also stated that they might "pause or reverse" these increases if the market conditions change. 

The U.S. Labor Data

On Friday, August 2, 2024, the U.S. reported the Non-Farm Employment Change and the Unemployment Rate, both of which were lower than expected, reaching levels not seen in a long time. This has raised concerns about the job market. The unemployment rate also triggered the Sahm Rule by showing, a reliable recession indicator created by economist Claudia Sahm in 2019. The Sahm Rule helps identify when a recession might be happening. It states that if the average unemployment rate over the past three months increases by 0.5% or more compared to its lowest point in the last year, it could mean the economy is heading into a recession. Applying the Sahm Rule, we find that the lowest unemployment rate in the past year was 3.4% in February 2023. The current three-month average, from June 2024 to August 2024, is calculated as (4.0% + 4.1% + 4.3%) / 3, resulting in 4.13% (Figure 1). Comparing this to the lowest rate of 3.4%, we see an approximate increase of 0.73 percentage points. Since this increase is greater than 0.5, the Sahm Rule is triggered. In simple terms, if a lot more people start losing their jobs compared to a year ago, it might mean the economy is in trouble, as per analyst analysis.

Figure 1: U.S. Unemployment Rate, Jan 6, 2023 – Aug 2, 2024, forex factory

Upcoming Earning Releases This Week:

Stay tuned to our telegram channels to get the latest Earnings Releases. 

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What to Watch Out for This Week

This week's news is less hectic than last week's, with the spotlight on the RBA's cash rate announcement and the upcoming release of inflation data from China. Let’s take a closer look: 

Australia

On Tuesday, August 8, 2024, the Cash Rate will be released at 8:30 AM, GMT+4 (Dubai Time). The market anticipates that the Reserve Bank of Australia (RBA) will keep the rate steady at 4.35%, unchanged since December 2023, due to lower-than-expected inflation this quarter. The key question for their meeting at 9:30 AM, GMT+4 (Dubai Time) is whether this will lead the RBA to be less aggressive about future rate hikes. With the U.S. Federal Reserve also becoming less aggressive, analysts believe there's a good chance the RBA might follow suit.

China 

On Friday, inflation data, including the Consumer Price Index (CPI) year-over-year and the Producer Price Index (PPI) year-over-year, will be released at 5:30 AM, GMT+4 (Dubai Time). The market expects the CPI to rise to 0.3% from the previous 0.2%, while the PPI is anticipated to decrease to -0.9% from the previous -0.8%. Despite these specific figures, the overall trend since the start of the year shows signs of improvement. This shift from negative to positive inflation indicates increasing economic activity in China, as per analyst analysis.