Today’s Big Picture
Asia-Pacific equity indexes ended today’s session mixed. Hong Kong’s Hang Seng fell 0.67%, China’s Shanghai Composite ended the day essentially flat, down a mere 0.02% while Australia’s ASX All Ordinaries gained 0.50%, Taiwan’s TAIEX advanced 0.84%, and Japan’s Nikkei rose 1.14%. India’s markets are closed to mark the country’s Independence Day holiday and South Korean markets are closed today to mark that country’s Liberation Day. Interestingly, Liberation Day is celebrated in both South and North Korea. By mid-day trading, major European equity indices are up moderately, and U.S. futures point to a down open later this morning.
Following the robust movement in equities over the last few weeks, as we start the new week off, they look to give back at least some of those gains. The surprise rate cut by the People’s Bank of China this morning raises fresh questions over the speed of the global economy, especially after July economic data for China missed expectations. Even though we have a sizable downshift in the number of companies reporting their quarterly earnings this week, we see a meaningful pivot toward retail companies, the majority of which were plagued with bloated inventories when they reported their prior quarter. Expectations are for margin and bottom line pain as they look to clear out those inventories in time to prepare for the important holiday shopping season. As these reports roll in, we’ll know how bad the pain is and whether consumers are biting.
The People’s Bank of China surprised by cutting its one-year lending facility rate by 10 basis points to 2.75% and cut the seven-day lending rate, the same amount to 2%. The move preceded weaker than expected July data for the country. China’s July Industrial Production rose 3.8% YoY, below the expected 4.6%, and slightly lower than June’s 3.9% figure. Retail sales increased 2.7% YoY in July below the 5% forecast. Manufacturing hubs and popular tourist spots imposed lockdown measures in July after fresh outbreaks of the more transmissible Omicron variant were found. On Friday, China reported more than 2,000 local Covid-19 cases as infections in the southern Hainan island edged higher with mass testing and several lockdowns resulting.
Japan’s preliminary GDP for 2Q 2022 came in at 2.2% YoY, better than the 0.1% reading for the prior quarter but below the expected 2.5% figure. On a QoQ basis, the preliminary reading was 0.5%, up from 0.0% in 1Q 2022 but again below the expected figure of 0.6%.
Wholesale prices in Germany increased by 19.5% YoY in July of 2022 following the 21.2% gain the prior month. Compared with the previous month, wholesale prices fell 0.4% in July, the first decline since October 2020.
At 8:30 AM ET, we’ll get the NY Empire Manufacturing Index data for August and the headline reading is projected to fall to 5.5 from July’s 11.1 reading.
AT 10 AM ET, the NAHB Housing Market Index for August will be published, and the consensus view has it unchanged MoM at 55.
The U.S. House of Representatives voted 220 to 207 along party lines on Friday to pass the Inflation Reduction Act, paving the way for wide-ranging reforms in healthcare and clean energy. President Biden is expected to sign the bill into law.
Data from AAA put the national average gas price at $3.959 over the weekend, but Goldman Sachs (GS) sees the price surging back to $5 by the end of the year with Brent crude returning to $130 a barrel as the market still needs to balance rising demand and tight supplies.
Following last week’s inflation data, markets see a 50% chance the Fed will hike by 75 basis points in September and that rates will rise to around 3.50-3.75% by the end of the year. Meanwhile, the bond market continues to question if the Fed can deliver a soft landing, with the yield curve remaining deeply inverted.
Markets closed the week on a strong note with Friday seeing almost all sectors up over 1.00% and Consumer Discretionary names well over 2.00%. The Dow rose 1.37%, the S&P 500 advanced 1.73% and both the Nasdaq Composite and the Russell 2000 posted a 2.09% gain on the day. In reviewing top contributors to returns across the sectors, Apple (AAPL) and Microsoft (MSFT) combined to account for about 48% of Technology sector returns, while Tesla (TSLA) managed to do that all on its own for the Consumer Discretionary sector.
Here’s how the major market indicators stack up year-to-date:
- Dow Jones Industrial Average: -7.09%
- S&P 500: -10.20%
- Nasdaq Composite: -16.60%
- Russell 2000: -10.19%
- Bitcoin (BTC-USD): -48.93%
- Ether (ETH-USD): -48.19%
Stocks to Watch
Before trading kicks off for U.S.-listed equities, Clear Secure (YOU), Li Auto (LI), Tufin Software (TUFN), and Weber (WEBR) will be among the companies issuing their latest quarterly results and guidance.
GigaCloud Technology (GCT) and Innovative Eyewear (LUCY) could price their respective IPOs this week. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.
After Today’s Market Close
Fabrinet (FN), Global-E Online (GLBE), Navitas Semiconductor (NVTS), World Wrestling (WWE), and ZipRecruiter (ZIP) are expected to report their quarterly results after equities stop trading today. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar.
On the Horizon
Tuesday, August 16
- UK: Employment Change, Average Hourly Earnings – June
- Germany: ZEW Current Conditions & Economic Sentiment – August
- Eurozone: ZEW Economic Sentiment – August
- US: Housing Starts & Building Permits – July
- US: Industrial Production & Capacity Utilization – July
Wednesday, August 17
- Japan: Core Machinery Orders – June
- Japan: Imports/Exports – July
- UK: CPI, PPI – July
- Eurozone: 2Q 2022 GDP
- US: Weekly MBA Mortgage Applications
- US: Retail Sales – July
- US: Business Inventories – June
- US: Weekly EIA Crude Oil Inventories
- US: Federal Reserve FOMC Meeting Minutes – July
Thursday, August 18
- Eurozone: CPI – July
- US: Weekly Initial & Continuing Jobless Claims
- US: Philadelphia Fed Index – August
- US: Existing Home Sales – July
- US: Weekly EIA Natural Gas Inventories
Friday, August 19
- Japan: CPI – July
- UK: Retail Sales – July
- Germany: PPI – July
Thought for the Day
“People who avoid failure also avoid success.” ~ Derrick Lewis
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.