— This is the script of CNBC's news report for China's CCTV on August 21, Monday.
In the upcoming week, the global market will place its focus on the annual Economic Policy Symposium held at Jackson Hole, United States. As little economic data would be released this week, the focus turns to speeches of Janet Yellen, Chairman of the Federal Reserve, and Mario Draghi, President of the European Central Bank, happening this Friday, 10am and 3pm U.S time respectively. Highly anticipated, investors are looking to these speeches for the market's direction. First of all, Yellen's speech will be on "financial stability".
Her speech is not expected to be radical. Yet, if Yellen amplifies "the worries of financial stability" and turns it into a supportive factor of rate hike, it is very likely the market would interpret this as a strong sign of rate hike.
In the meeting minutes released in July, Fed officials were split over their rate hike decision. One group of officials felt that inflation was falling too low and argued for suspension of rate hike. Others expressed concerns that keeping a loose policy would pose increasing risks to the economy, which Fed needs to address.
Over at the United States, recent events such as Trump's staff shake-up and protests have caused the market to doubt whether Trump could implement its tax reforms and economic stimulus in time. Last week, the U.S. stock market faced technical pressure, which caused them to lower their expectations that Fed would implement a rate hike this year. Besides, many people are starting to question the credibility of Fed, with many thinking that the trend of the market and Fed's rate hike would be divided.
[RICHARD HARRIS, Port Shelter Investment Management Chief Executive] "The problem the Fed's got is so many of the old mantras that they have relied on, even things like interest rates and currency movements, a lot of all these mantras, these old connections that we hold so dear, a lot of them aren't working anymore and it is really fighting the last war to sort of try and see, well if you do this and that's going to happen because many of them aren't working and the reason they are not working, I think, is interest rates are so low that you dont have the interst rates lever anymore."
At the same time, the speech of Mario Draghi, President of European Central bank speech is highly anticipated by the market. The market is closely watching for any possible announcements or hints of ECB's major decisions, including the announcement to reduce or suspend quantitative easing programs. Some analysts believe that the Jackson Hole symposium is a good opportunity for Draghi to test the waters, to announce any possible changes in ECB's monetary policy.
However, there are also others who believe that Draghi would not announce anything major. This is because with the lack of clear market communication, any major announcements would likely cause the market to go into a "taper tantrum", fluctuating rampantly. In addition, during the July's policy meeting, ECB's policymakers have reached a consensus on only starting policy discussions in autumn. Therefore, it is believed that Draghi will not go back on this promise.
Yet, his speech is still worthy of attention because any possible signs may potentially affect the market.
[RICHARD HARRIS, Port Shelter Investment Management Chief Executive] "That's perhaps slightly more important because that's when the ECB is way behind the ball on everybody else and they maybe need to make some decisions, what are they going to do about Europe, what are they going to do about the fact that they have been stimulating the economy and yet the economy looks as if it is not doing too bad in Europe so I think Draghi is probably the one to look for but I suspect that they all going to be terrified of saying something that it is going to scare the horses."
We will continue to keep watch.
CNBC's Qian Chen reporting from Singapore.