Morning Markets
September E-Mini S&P 500 futures (ESU23) this morning are down -0.10%, and Sep Nasdaq 100 E-Mini futures (NQU23) are up +0.03%.
U.S. stock index futures this morning are mixed, following losses in European and Chinese stocks, on global economic concerns after China’s Q2 GDP grew less than expected. Strength in EV makers is keeping Nasdaq 100 futures in positive territory after China’s BYD Co reported a three-fold increase in first-half net profit.
Several investment banks lowered their forecasts for Chinese growth this year after China’s Q2 GDP disappointed. Citigroup lowered its China 2023 GDP forecast to 5.0% from 5.5%, Morgan Stanley cut its China 2023 GDP forecast to 5.0% from 5.7%, and JPMorgan Chase lowered its China 2023 GDP estimate to 5.0% from 5.5%.
Today’s economic news showed the U.S. Jul Empire manufacturing survey of general business conditions index fell -5.5 to 1.1, stronger than expectations of -3.5.
The markets are discounting the odds at 92% for a +25 bp rate hike at the next FOMC meeting on July 25-26. The markets are anticipating a peak funds rate of 5.42% by November, which is +34 bp higher than the current effective federal funds rate of 5.08%.
Global bond yields are lower. The 10-year T-note yield is down -2.4 bp at 3.809%. The 10-year German bund yield fell to a 1-1/2 week low of 2.444% and is down -3.8 bp at 2.474%. The 10-year UK Gilt yield is down -2.3 bp at 4.421%.
Overseas stock markets are lower. The Euro Stoxx 50 is down -1.21%. China’s Shanghai Composite Index today closed down -0.874%. Japan’s Nikkei Stock Index was closed for the Marine Day holiday.
The Euro Stoxx 50 today is moderately lower. Weakness in European commodity and luxury stocks is leading the overall market lower on concerns over China’s struggling economy after Q2 China GDP was reported weaker than expected. European stocks fell further after JPMorgan Chase projected “another leg of underperformance ahead,” citing a worsening “growth-policy trade-off” in the second half “due to likely continued central bank tightening on one side, and M1 money supply pointing to more activity disappointments ahead on the other.” On the positive side was today’s decline in European government bond yields as the 10-year German bund yield fell to a 1-1/2 week low of 2.450%.
In its monthly report, Germany's Bundesbank said, "The economic recovery in the future course of the year could be somewhat more hesitant than expected in the June forecast,” and core prices will probably stay "very high over the summer."
China’s Shanghai Composite today closed moderately lower. Signs that China’s recovery from the pandemic has stagnated undercut stocks today after Q2 China GDP grew less than expected and June retail sales were weaker than expected. Also, weakness in Chinese property stocks weighed on the overall market today’s news showed China’s Jan-Jun property investment declined more than expected. Also, a unit of Dalian Wanda Group, among the few Chinese real estate conglomerates to stay afloat during the property crisis, told some creditors today it’s still raising funds for a $400 million note that matures July 23.
On the positive side, Chinese cybersecurity stocks gained after President Xi Jinping said the sector is becoming increasingly important. Also, Chinese stocks related to environmental protection rose after state media People’s Daily cited comments by President Xi Jinping on its front page urging for better ecological preservation.
China’s Q2 GDP rose +6.3% y/y, weaker than expectations of +7.1% y/y.
China June property investment fell -7.9% year-to-date y/y, weaker than expectations of -7.5% y/y.
China June retail sales rose +3.1% y/y, weaker than expectations of +3.3% y/y.
China June industrial production rose +4.4% y/y, stronger than expectations of +2.5% y/y.
Japan’s Nikkei Stock Index today was closed for the Marine Day holiday, and markets in Hong Kong were closed because of typhoon Talim.
Pre-Market U.S. Stock Movers
AT&T (T) fell more than -1% in pre-market trading after Citigroup downgraded the stock to neutral from buy.
Paramount Global (PARA) dropped more than -2% in pre-market trading after the Mission Impossible Movie-Dead Reckoning Part One earned only $56.2 million in theaters this past weekend, well below projections of $68 million.
State Street (STT) slid more than -2% in pre-market trading after JPMorgan Chase downgraded the stock to underweight from neutral.
PepsiCo (PEP) fell more than -1% in pre-market trading after Morgan Stanley downgraded the stock to equal weight from overweight, citing valuation.
Conagra (CAG) dropped nearly -2% in pre-market trading after Morgan Stanley downgraded the stock to equal weight from overweight, citing growth outlook headwinds.
Bright Horizons Family Solutions (BFAM) tumbled more than -2% in pre-market trading after BMO Capital Markets downgraded the stock to market perform from outperform.
Electric vehicle (EV) stocks are moving higher in pre-market trading after China’s BYD Co reported a three-fold increase in first-half net profit. Lucid Group (LCID) is up more than +2%, and Tesla (TSLA) is up more than +1%.
Chewy (CHWY) climbed more than +4% in pre-market trading after Goldman Sachs upgraded the stock to buy from neutral with a price target of $50.
Activision Blizzard (ATVI) is up more than +4% in pre-market trading after a U.S. appeals court denied the FTC’s bid to pause the deal.
Bridgebio Pharma (BBIO) surged more than +60% in pre-market trading after it reported consistently positive results with no safety signals from its Phase 3 study of its drug acoramidis to treat transthyretin amyloid cardiomyopathy.
Today’s U.S. Earnings Reports (7/17/2023)
CrossFirst Bankshares Inc (CFB), Equity LifeStyle Properties Inc (ELS), FB Financial Corp (FBK), Guaranty Bancshares Inc/TX (GNTY), Home Bancorp Inc (HBCP).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
