US equity futures turned positive after earlier losses, with small-caps leading and Tech lagging. This followed a partial retracement from the previous day and disappointing earnings from Semis last night. As of 7:30am, S&P futures were up 0.1%, while Nasdaq futs were down 0.1%, led by Mag7 stocks mostly flat/up except for NVDA which was down 80bps. Bond yields were lower, USD was flat, and commodities were weaker, although WTI was higher. Macro data ahead of tomorrow’s Flash PMIs was primarily regional activity indicators. A 2Y bond auction was scheduled for the day, with rates traders expecting a modest concession.
Premarket trading saw NXP Semiconductors shares drop 7.9% after a weaker-than-expected third-quarter revenue forecast. Wiz rejected a takeover bid from Alphabet in favor of an IPO plan. General Electric rose in premarket trading after reporting an increase in second-quarter profit. Other notable premarket movers included:
- Azek shares dropping 2.1% after an analyst cut the recommendation.
- Danaher shares climbing 6.8% after beating analyst estimates.
- Polaris shares slumping 16% after lowering full-year forecasts.
- Snap shares rising 3.2% after a recommendation upgrade.
- Under Armour falling 3.1% after a recommendation cut.
- UPS shares dropping 7.4% after missing earnings expectations.
With Tesla and Alphabet among the companies reporting earnings this week, analysts were focused on details such as Tesla’s robotaxi service and Google’s cloud unit performance. Technology firm valuations remained high, and investors awaited more evidence to justify the excitement around artificial intelligence.
European markets saw the Stoxx 600 Index rise 0.6%, with notable movers including:
- SAP shares hitting a record high after strong cloud backlog growth.
- Compass Group shares climbing after solid third-quarter results.
- Banca Generali shares rising after a recommendation upgrade.
- Interparfums shares soaring after reporting resilient sales.
- ID Logistics shares reaching record highs after beating estimates.
- Indivior shares rising after a recommendation upgrade.
- Givaudan shares dropping after disappointing results.
- Edenred shares falling after revenue missed estimates.
- UPM-Kymmene shares sliding after weak earnings.
- Thales shares falling after reporting results in line with expectations.
- Akzo Nobel shares dropping after cutting guidance.
- Lindt shares falling after mixed results.
In Asia, stocks gained, tracking Wall Street’s advance and driven by a rebound in technology shares ahead of earnings season.
After Joe Biden’s withdrawal, a sense of calmness returned to the US election. In the FX market, the Bloomberg Dollar Spot Index remained steady, with the yen leading the G-10 FX leaderboard for a second day. Traders are preparing to adjust their carry positions during the summer holiday season, with the Bank of Japan policy meeting approaching. There are mixed views among Bank of Japan officials about raising rates at the July meeting, as consumer spending weakness complicates their decision.
In the rates market, treasuries rose, with US 10-year yields falling while gilts and most euro-zone bond markets saw larger advances. The yield curve flattened as the front end lagged ahead of the upcoming 2-year note auction. Oil prices climbed, with WTI trading near $78.60 a barrel and spot gold rising to around $2,405/oz.
Today’s economic data calendar includes the July Philadelphia Fed National Activity Index, July Richmond Fed Manufacturing Index, and June existing home sales in the US. Fed members scheduled to speak before the next FOMC meeting begins include Governor Bowman and Dallas Fed President Logan on July 24.
In global markets, APAC stocks were mixed following a tech-led rebound on Wall Street, with sentiment clouded by ongoing China woes. ASX 200 was supported by tech stocks, while energy sector suffered due to recent declines in oil prices. The Nikkei 225 started strong but has since lost most of its gains due to a stronger currency and uncertainty surrounding rates at the upcoming BoJ meeting. Meanwhile, the Hang Seng and Shanghai Comp. remained subdued, with the latter lagging behind as the PBoC’s recent actions left investors unsatisfied.
In other news, China added 6.98 million urban jobs in the first half of the year, India’s budget shows low inflation and fiscal deficit projections, and Chow Tai Fook Jewellery reported a decline in quarterly retail sales.
European bourses are mostly higher, with Tech leading the gains. US equity futures are mixed, with the NQ underperforming after poor results from NXP. Citi Global Equity Strategy made several rating changes for sectors.
In the FX market, USD is softer against JPY but firmer against other currencies. EUR/USD remains below 1.09, GBP is slightly weaker, JPY is outperforming USD, and Antipodeans are softer. PBoC set USD/CNY mid-point below expectations.
In the fixed income market, USTs are steady, Bunds are choppy, and Gilts are lagging. UK sold GBP 1 billion in 0.125% 2039 I/L Gilt.
Commodities are trading mixed, with crude futures consolidating, precious metals in the red, and base metals mostly softer. News on the world refined copper market and German hydrogen grid plans. Iran sets August Iranian Light Crude OSP to Asia.
In geopolitics, Israeli warplanes broke the sound barrier over Lebanon, a meeting between Israeli PM Netanyahu and US President Biden was postponed, and efforts to end the Gaza conflict continue. Israeli operation in Khan Yunis resulted in casualties. Additionally, Israel carried out raids on the town of Aita al-Shaab in southern Lebanon, while Hezbollah responded by shelling the Tzuriel colony with Katyusha rockets for the first time, in retaliation for the attack on civilians. This information was reported by Al Arabiya and Al Jazeera. Japan is set to impose sanctions on Israeli settlers in the West Bank, freezing their assets, following similar actions by the US and UK, as reported by NHK. Fatah and Hamas leaders are scheduled to meet with the press in Beijing after reconciliation talks, with Chinese Foreign Minister Wang Yi attending the meeting, according to CGTN. Iraq is planning to reduce US-led forces starting in September and officially end the coalition’s work by September 2025, with some US forces possibly remaining in a newly negotiated advisory role, as stated by four Iraqi sources cited by Reuters.
In other geopolitical news, US official Kritenbrink mentioned that the meeting of US-Japan defence and foreign ministers will demonstrate the commitment of both countries to not only defend Japan but also contribute to regional security. There was also a Russian overnight attack on an energy facility in the Sumy region, cutting power to over 50,000 consumers, according to Ukraine’s energy ministry.
The overnight wrap by DB’s Jim Reid highlighted the market stabilization and recovery led by the Magnificent 7 after a recent slump. With earnings season approaching, optimism prevailed across markets, with the S&P 500 and STOXX 600 posting their best sessions since early June. The reaction to President Biden’s withdrawal and Vice President Harris’ position as the Democratic frontrunner was also discussed, with implications on market trends and the upcoming US election.
When it comes to specific movements in the market, the CSI is leading the losses with the Shanghai Composite and the Hang Seng also seeing decreases. The S&P 500 and NASDAQ 100 futures are also heading lower.
Looking ahead to today, data releases will include US existing home sales for June, the Richmond Fed’s manufacturing index for July, and the European Commission’s preliminary consumer confidence indicator for the Euro Area in July. The ECB’s Lane will also be speaking today, and earnings reports are expected from Alphabet, Tesla, Visa, Coca-Cola, General Electric, and General Motors.
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