17 Jul

China is experiencing a slowdown in economic growth. In the US, the reporting period for the second quarter has started

July 17, 2023

By JustMarkets

At Friday’s close, the Dow Jones Index (US30) increased by 0.33% (+2.38% for the week), while the S&P 500 Index (US500) was down by 0.10% (+2.53% for the week). The NASDAQ Technology Index (US100) closed negative by 0.18% (+3.43% for the week) on Friday.

Rising interest rates, which surprised many US banks, proved to be a boon for the nation’s largest banks. JPMorgan Chase (JPM) posted record profits, and some of its major competitors reported better-than-expected loan income. Shares of JPMorgan Chase (JPM) rose by 0.6%, while Wells Fargo (WFC) fell by 0.3%. Both major banks reported higher quarterly earnings but said they set aside more funds to cover expected losses on commercial real estate loans. Friday’s quarterly reports unofficially opened the second quarter in the US. According to Refintiiv, analysts expect S&P 500 earnings for the quarter to be down by 8.1% compared with a year ago result, but most companies are expected to beat expectations.

The US consumer sentiment jumped to a near two-year high. The University of Michigan’s preliminary index rose by 8.2 points to 72.6, the highest level since September 2021. The index beat all forecasts. The surge in sentiment was largely attributed to a continued slowdown in inflation along with stability in the labor market. Friday’s report also showed that consumers expect low unemployment over the next year, and most believe their incomes will rise by at least as much as inflation rises. While longer-term inflation expectations appear reasonable, minutes from the Fed’s June meeting showed that some officials remain concerned that these expectations may become unreasonable, especially in light of stronger-than-expected consumer demand and a robust labor market.

Equity markets in Europe were mostly down on Friday, but all closed in positive territory at the end of the week. Germany’s DAX (DE30) decreased by 0.22% (+3.33% for the week), France’s CAC 40 (FR40) added 0.06% on Friday (+4.12% for the week), Spain’s IBEX 35 (ES35) was down by 0.43% (+2.47% for the week), and the UK’s FTSE 100 (UK100) closed negative by 0.08% (+2.45% for the week).

US Treasury bond yields have fallen sharply over the past week as traders raised bets that the US Federal Reserve’s monetary tightening program is coming to an end. Rate-sensitive UST 2 yields are down 50 basis points since last Thursday, while UST 10 yields are down about 30 basis points, and UST 30 yields are down about 18 basis points over the same time period. Since gold and silver have an inverse correlation to US government bond yields, there is a high probability of continued uptrends in the precious metals.

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Despite a slight decline in oil prices on Friday, oil prices posted their third consecutive weekly gain last week, and the potential for further gains remains as weakening inflation, plans to replenish the US strategic reserve, supply cuts, and production disruptions in some OPEC countries support black gold prices.

Asian markets were mostly on the rise last week. Japan’s Nikkei 225 (JP225) was little changed for the week, China’s FTSE China A50 (CHA50) gained 2.20%, Hong Kong’s Hang Seng (HK50) ended the week up by 3.55%, and Australia’s S&P/ASX 200 (AU200) ended the week positive by 3.70%.

Chinese indices fell sharply on Monday after data showed a significant slowdown in the country’s economic growth in the second quarter. China’s gross domestic product (GDP) grew by 0.8% in the second quarter. The figure was above expectations of 0.5% growth but significantly weaker than the 2.2% jump recorded in the first quarter. The annualized GDP figure fell short of expectations, showing growth of 6.5% vs. the expected 7.3%. China’s manufacturing sector also came under pressure due to sluggish overseas demand for Chinese exports amid deteriorating economic conditions globally. The data suggest that the economic recovery in Asia’s largest country is decreasing and that the government will likely have to consider additional stimulus measures in the coming months.

S&P 500 (F)(US500) 4,505.42 −4.62 (−0.10%)

Dow Jones (US30) 34,509.03 +113.89 (+0.33%)

DAX (DE40)  16,105.07 −35.96 (−0.22%)

FTSE 100 (UK100) 7,434.57 −5.64 (−0.076%)

USD Index  99.96 +0.19 (−0.19%)

Important events for today:
  • – China GDP (q/q) at 05:00 (GMT+3);
  • – China Industrial Production (m/m) at 05:00 (GMT+3);
  • – China Retail Sales (m/m) at 05:00 (GMT+3);
  • – China Unemployment Rate (m/m) at 05:00 (GMT+3);
  • – Eurozone ECB President Lagarde Speaks at 11:15 (GMT+3);
  • – US NY Empire State Manufacturing Index (m/m) at 15:30 (GMT+3).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.


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