The US consumer continues to spend but labour market doubts and uncertainty over the upcoming school year point to a sluggish rest of summer. Initial jobless claims continue to print over a million every week, while continuing claims is struggling to decline.
The gradual reversal of reopening efforts across the US will likely continue to lead to deteriorating outlook for the labour market and that should keep the pressure on the US government to deliver more fiscal stimulus before the end of the month.
Retail sales delivered another strong beat across the board, but Wall Street is concerned back-to-school sales will disappoint as many Americans are uncertain a normal opening in the Fall will happen.
EU Council meeting
EU leaders will have their first face-to-face summit in five months. The two-day meeting is expected to provide a breakthrough on how to spend 1-trillion euros in over seven years and finalizing the terms for the EU recovery fund. Wall Street is fully expecting EU leaders to get this stimulus package done, but there is a chance it doesn’t get finalized this week.
OPEC+ did the right thing, but it’s a whole new ballgame. The decision to taper production cuts gives them some room to manoeuvre in case a second wave of the coronavirus forces a return of lockdowns that will shock crude demand. Oil prices are slumping as the global economic recovery is threatened by risks of new closures and as US unemployment remains high and China’s consumer struggles to bounce back.
WTI Crude remains trapped in the low-$40s but that could break if the slow labour market recovery is not met with a strong fiscal response next week. Right now, oil prices will take their queue primarily on demand headlines, which means it’s all about coronavirus lockdowns and travel restrictions.
Gold’s slump may turn into further weakness tentatively if risk aversion continues to drive the dollar rebound. Gold prices fell after US retail sales beat forecasts and on President Trump’s comment that he would not sign the next COVID relief bill without a payroll tax. It is widely expected for the US to see another fiscal stimulus package, but Trump’s comment threatened the immediacy of one passing. Gold’s fundamentals still support the climb to record high territory, but in the short-term prices could see a retest near last week’s low.