Market Overview

31 August 2023

Central Bankers Constrain Investing Activity

China-related stocks' rebound after Beijing's attempts to support its previously cracked down market provided a limited aid to Wall Street indexes and industries in both the U.S. and Europe earlier in the week. 3M Company's share price added more than 6% after it ultimately agreed to pay $6 billion to settle nearly 260,000 lawsuits, which accused the giant company on selling defective combat earplugs. Hearing loss has affected thousands of U.S. military service members.

Best Buy stocks jumped nearly 3.3% on August 29, after a well-known retailer of electronics reported a smaller-than-feared decline in its Q2 comparable sales. Deeper discounts pushed consumers to shop more, the chain's CEOs Corie Barry said. The share price of Oracle initially gained 2.7% at the same day's pre-market, yet lost almost half of these gains. This was a logical development after NVIDIA earnings and shining forecasts for the rest of the year revitalised the AI story, which may give a plenty of room for a possible rise of other techs. Telecom stocks of Verizon and AT&T also gained 2.5% and 2.9% after an upgrade by Citigroup and some funds. 

These efforts, however, are not enough to return to a broad-based bullish trend on Wall Street. Many investors are still shocked by Jerome Powell's speech at Jackson Hole symposium last Friday, where the frontman of the Federal Reserve (Fed) said that U.S. central bankers would decide, "whether to tighten further or, instead, to hold the policy rate constant", awaiting further inflation data. In another sentence, he also admitted that “we are prepared to raise rates further if appropriate", or at least to keep the rates "at a restrictive level" until "we are confident that inflation is moving sustainably down" toward the Fed's 2.0% long-term target. This needs "a period of below-trend economic growth" and "some softening" in labour market conditions, which the Fed believes are still tight.

Powell is also concerned by real wage growth, what "matters for households", while most of the market and ordinary folks are rather concerned that their salaries are not enough to catch all previous inflation spikes. "Even as nominal wage growth has slowed, real wage growth has been increasing as inflation has fallen", Powell said. Central bankers' desire to freeze real incomes in America and Europe looks similar, as the European Central Bank (ECB) head Christine Lagarde also spoke the same evening about "higher for longer" rates to achieve inflation targets. "In the current environment, this means – for the ECB – setting interest rates at sufficiently restrictive levels for as long as necessary," Lagarde said. Comments of that kind are clearly clouding the market horizon, preventing investors from being overactive in picking up a variety of discounted stocks.


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Constantinos Anastasiou
  • Position in Company: Dealer
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