The world awaits with bated breath as the FOMC Blackout period begins on Sept 7 and ends on Sept 19. The 10-year US treasuries yield is at 3.69%. However, short-term RSI is at 36, which is low, but not excessively oversold. If the downward trend continues, there could be a rebound next week, but the rebound is likely to be temporary.
Non-farm payrolls for August expanded by 142,000, below the 161,000 consensus forecast but above levels in June and July. The unemployment rate fell marginally to 4.2%. This is despite the participation rate holding steady at 62.7%
The FTSE REIT Index continues to make headway following a break above 640 a couple of weeks ago, indicating an upside of 721. The REIT Index’s uptrend is likely to be punctuated by temporary retreats.
The Straits Times Index (STI), which closed at 3,454 points on Sept 6, up 12 points week-on-week, has encountered resistance near the July high of 3,499. Indicators are neutral to positive, but important highs are likely to act as resistance levels. Hence, a breakout may not materialise on the first challenge, which is what current market action appears to be. Instead, the STI is likely to consolidate sideways as the REIT Index moves higher.
Furthermore, the S&P 500 has retreated to 5,503 as at Sept 5, after moving within a whisker of its all-time high of 5,667, which was attained on July 16. The consolidation by the S&P 500 is likely to dampen sentiment for the STI.
Nobel Laureate Joseph Stiglitz says the Fed should deliver a half-point interest rate cut at the upcoming FOMC meeting, CNBC reports. He reckons the Fed has gone too far too fast with monetary tightening.
See also: STI steadies despite overbought US markets and rising US risk-free rates
However, Carl Weinberg, chief economist at High Frequency Economics, is not expecting a 50 basis point (bp) cut. “It’s going to take a big uptick in initial claims for unemployment insurance, evidence of more layoffs occurring in the economy, and a sharp drop off in hiring,” for the Fed to cut such a large amount, CNBC reports Weinberg saying.
