“Concerns about the Chinese economy grew this morning after real estate firm Country Garden suspended trading in select offshore bonds, reminding investors of Chinese property market volatility from years ago and reinforcing that recession risks in China are real,” said Tom Essaye, the founder of Sevens Report Research.
Click here to read the full article.
The Country Garden news reinforced the notion that “recession risks in China are real,” explained Sevens Reports’ Tom Essaye. Click here to read the full article.
What’s in Today’s Report:
U.S. equity futures are tracking global markets lower this morning amid more negative news flow out of China while Treasury yields continue to test to cycle highs with the 10-Year Note yield above 4.20%.
Multiple Chinese economic reports badly missed estimates overnight with Retail Sales notably rising just 2.5% vs. (E) 4.2% in July.
The bad data and renewed concerns about the property market prompted surprise rate cuts by the PBOC but the policy action was seen as underwhelming by investors and markets traded with a decisive risk-off tone overnight.
Looking into today’s session, the headlines out of China will continue to influence money flows, however there are several key U.S. economic reports to watch this morning including: Retail Sales (E: 0.4%), Empire State Manufacturing Index (E: -0.4), Import & Export Price (E: 0.2%, 0.1%), and the Housing Market Index (E: 56).
Markets continue to look for “Goldilocks” dynamics in the data, consistent with easing growth, a loosening labor market, and continued drop in inflation. Anything that contradicts those trends could further risk assets including stocks today.
There is also one Fed speaker today: Kashkari (11:00 a.m. ET) but it is doubtful he wavers from the Fed’s narrative and is unlikely to move markets.
What’s in Today’s Report:
Futures are drifting modestly higher following a quiet weekend of news, as markets digest the uptick in volatility so far in August.
Concerns about the Chinese economy grew this morning after real estate firm Country Garden suspended trading in select offshore bonds, reminding investors of Chinese property market volatility from years ago and reinforcing that recession risks in China are real.
There was no notable economic data overnight.
Today there are no notable economic reports so focus will remain on Treasury yields ahead of important economic data and earnings later this week. Generally speaking, the more calm the movement in yields (so no big rallies and no big declines) the better for stocks.
“The Italian government clarified that a windfall tax on bank profits would be capped, sparking a relief rally in European financials and general risk-on trade in global markets,” Essaye writes. “There are no notable economic reports and no Fed officials are scheduled to speak today which is setting the session up to be fairly quiet as traders await tomorrow’s CPI release.” Click here to read the full article.
What’s in Today’s Report:
Futures are modestly higher as markets bounce back ahead of this morning’s CPI report and following some positive U.S./China geopolitical headlines.
The U.S. unveiled Chinese investment restriction rules that were less intense than feared, while China removed restrictions on group travel to the U.S. (providing small steps towards a more normal U.S./China relationship).
Today focus will be on CPI and estimates are as follows: E: 0.2% m/m, 3.3% y/y, Core CPI E: 0.2% m/m, 4.8% y/y. As we state in the CPI Preview, the risk for markets is that CPI is more resilient than expected, because at these levels investors are already assuming continued disinflation.
The other notable economic report is Jobless Claims (E: 230K) and markets will want to see that number gradually move higher to reduce the likelihood of one more rate hike. Finally, there’s one Fed speaker today, Harker (4:15 p.m. ET), but he shouldn’t move markets.
What’s in Today’s Report:
Futures are slightly lower following mixed Chinese economic data and a potential further escalation of the Russia/Ukraine war.
Chinese economic data was mixed as GDP and Retail Sales both missed estimates, while Industrial Production beat, and the data will keep markets wanting more stimulus.
Possibility of further escalation of the Russia/Ukraine war increased after Ukraine claimed responsibility for the destruction of a bridge linking Crimea and Russia.
Today focus will be on the first data point for July, the Empire Manufacturing Index (E: -4.3). Markets will want to see this number be stronger than expectations and ideally turn positive, furthering the “Golidlocks” market narrative of falling inflation but stable growth.
What’s in Today’s Report:
It’s “green on the screen” as global indices and U.S. futures extend yesterday’s CPI driven rally.
Economically, UK Industrial Production (IP) was better than feared (down –1.2% vs. (E) -1.5%) while EU IP slightly missed estimates (0.2% vs. (E) 0.5%).
Earnings season officially begins today and the first reports are solid, as PEP and DAL both beat earnings estimates.
Today focus will be on economic data, specifically Jobless Claims (E: 245K) and PPI (E: 0.2% m/m, 0.4% y/y, Core PPI E: 0.2% m/m, 2.8% y/y). If jobless claims are mostly stable and PPI falls more than expected, markets should extend yesterday’s “Immaculate Disinflation” driven rally. Finally, there is one Fed speaker today, Waller (6:45 p.m. ET), but markets are ignoring hawkish rhetoric right now so he shouldn’t move markets.
What’s in Today’s Report:
U.S. stock futures are extending this week’s gains ahead of the all-important CPI report this morning following a mostly quiet night of news.
There were no economic reports overnight but the Reserve Bank of New Zealand did notably pause their rate hiking cycle leaving their policy rate unchanged at 5.50% (however this was expected and did not meaningfully move markets).
Looking into today’s session the big catalyst is the CPI report due out before the open. On the headline, CPI is expected to come in at 0.3% m/m and 3.1% y/y while the Core figure is seen rising 0.3% m/m and 5.0% y/y.
From there, focus will turn to Fed speakers with Kashkari speaking shortly after the open (9:45 a.m. ET) and Mester at the close (4:00 p.m. ET).
Finally, there is a 10-Yr Treasury Note auction at 1:00 p.m. ET and the outcome could shed light on the bond market’s outlook for the economy and Fed policy expectations in the wake of the CPI data release, so there is potential this auction moves markets in the early afternoon.
What’s in Today’s Report:
Futures are modestly lower following a quiet weekend as investors look ahead to Wednesday’s CPI.
Most of the weekend news centered on China, as Yellen’s trip was viewed as constructive and will help slightly ease economic tensions between the two countries and that progress is a mild macro positive.
Economically, deflation risks are rising in China as CPI was flat y/y, highlighting the need for more economic stimulus.
Today there are no notable economic reports but there are numerous Fed speakers including Barr (10:00 a.m. ET), Daly (10:30 a.m. ET), Mester (10:30 a.m. ET) and Bostic (12:00 a.m. ET). Barr’s comments will be especially important because he may hint at more regulation for banks in the wake of the regional bank crisis, while a hawkish tone from the remaining Fed members could increase expectations for two more rate hikes (markets are currently only expecting one more rate hike).
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