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China Stimulus: Tom Essaye Quoted in Barron’s

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China Stimulus: Tom Essaye Quoted in Barron’s

China Stimulus Helps Asian Stocks Trade Higher

Worries over a slowdown in China have rattled global markets in recent months, with stimulus from Beijing doing little to stem the bleeding in stocks. However, the latest move to shore up the country’s economy seems to have been received more positively.

“China cut bank reserve requirements by 25 basis points in the latest step to help support the Chinese economy. And there are signs these measures are starting to have an impact,” said Tom Essaye, founder of Sevens Report Research.

Also, click here to view the full Barron’s article published on September 14th, 2023. However, to see Tom’s full comments on the current market environment sign up here.

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Why Did Stocks Drop on Friday?

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Why Did Stocks Drop on Friday? Strengthen your market knowledge with a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Did Stocks Drop on Friday?
  • Weekly Market Preview:  Will the Fed Confirm Market Expectations?
  • Weekly Economic Cheat Sheet:  Important Growth Data Throughout the Week (Could Confirm or Undermine Soft/No Landing Hopes)

Futures are slightly higher as markets bounce following Friday’s declines and after a quiet weekend of news.

The various strikes occurring across the country (writers, UAW) contributed to Friday’s market decline. There was little positive progress over the weekend on resolving either work stoppage.

Geopolitically, President Biden’s National Security Advisor met with China’s foreign minister. The meeting is raising hopes the U.S./China relationship could improve.

Today the only notable economic report is the Housing Market Index (E: 50.0) and that shouldn’t move markets as long as it doesn’t provide a major positive or negative surprise. Barring that, we’d expect pre-Fed positioning to generally drive trading today.

Why Did Stocks Drop

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CPI’s Influence on Market Dynamics: A Closer Look

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CPI’s Influence on Market Dynamics: Tom Essaye Quoted by BNN Bloomberg

Nasdaq 100 Drops 1 per cent as Apple slides after event

CPI is really key because if it halts its downward trend, markets will have to price in a more hawkish Fed. And that would be a headwind on stocks, said Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter.

Lastly, “Put in a more familiar way, CPI impacts two of the three pillars of the rally: disinflation and expectation the Fed is done with rate hikes,” Essaye noted.

Also, click here to view the full BNN Bloomberg article published on September 12th, 2023. However, to see Tom’s full discussion on CPI’s influence on markets sign up here.

CPI's Influence - BNN

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

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Oil Market Analysis: Potential Pullback Amidst Upward Trend

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Global Oil Demand & Market Analysis: Sevens Report Analysts Quoted in MorningStar

Oil prices extend rise on supply worries

“On balance, the absence of sizable downward revisions to global oil demand over the next two years, despite recession risks, helped the oil market power on to new highs. Futures have become overextended to the upside and are in technically overbought territory on the daily time frame charts, leaving the market susceptible to a profit-taking pullback in what is otherwise a still clearly upwardly trending energy market,” analysts at Sevens Report Research said in a note.

A hot consumer-price index reading Wednesday morning or a bearish weekly supply report from the Energy Information Administration could serve as a catalyst for a pullback,” they wrote.

Also, click here to view the full Morningstar article published on September 13th, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Global Oil - Morningstar

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

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Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Evidence of Some Deterioration in the Fundamentals

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Deterioration in the Fundamentals: Strengthen your market knowledge with a free trial of The Sevens Report.

What’s in Today’s Report:

  • Market Multiple Table:  Evidence of Some Deterioration in the Fundamentals

Futures are modestly lower on another negative AAPL article and more mixed economic data.

AAPL shares fell another 3% pre-market as Bloomberg also reported certain Chinese government agencies would be banned from using foreign made phones.

Economically, Chinese exports were no worse than feared (-8.8%). However, German Industrial Production missed estimates (-0.8% vs. (E) -0.2%) as global recession fears crept higher.

Today focus will be on economic data and Fed speak.  The two key reports to watch are Jobless Claims (E: 238K) and Unit Labor Costs (E: 1.7%).  Markets will want to see the former rise more than expected (but not too much more) and the later be less than expectations.  The opposite (low claims and high Unit Labor Costs) will push Treasuries higher and weigh further on stocks.

Turning to the Fed, New York Fed President Williams speaks at 3:30 ET. Since he’s part of Fed leadership, we’ll pay attention and markets will hope he hints that rate hikes are done.  Bostic also speaks at 3:45 ET but his message will likely be predictably dovish, and as such it won’t move markets.

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Will the Restart of Student Loan Payments Hurt the Economy?

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Will the Restart of Student Loan Payments Hurt the Economy: Strengthen your market knowledge with a free trial of The Sevens Report.

What’s in Today’s Report:

  • Will the Restart of Student Loan Payments Hurt the Economy?

Stock futures are lower with European shares after some hawkish ECB chatter and more bad EU economic data overnight.

The ECB’s Klass Knot noted overnight that a September rate hike is being “underestimated” by markets. This is weighing on risk assets modestly this morning.

Economically, German Manufacturers’ Orders collapsed by -11.7% vs. (E) -4.0% in July while Eurozone Retail Sales in July met estimates with a monthly decline of -0.2%. The data offered fresh evidence that the European economy is threatening to fall into recession despite ongoing calls for a global soft landing.

Today’s focus will be on economic data this morning with International Trade in Goods and Services (E: -$68.0B) and the ISM Services Index (E: 52.4) due to be released. The market is looking for signs of slowing demand but not a sharp downturn in growth.

The ISM will be the more important report to watch.  If we get a number that is “too hot” or “too cold” will likely see yesterday’s stock market declines extended, while a Goldilocks print will help markets stabilize.

There is also one Fed speaker today: Collins (8:30 a.m. ET). If she pushes back on the peak rate narrative or rate cuts in 2024, that will add another headwind to stocks and other risk assets today.

Economy

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Is Bad Economic Data Good For Stocks Now?

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What’s in Today’s Report:

  • Is Bad Economic Data Good For Stocks Now?  No.
  • EIA Analysis and Oil Market Update

S&P 500 futures are solidly higher thanks to strength in tech following very strong NVDA earnings.

NVDA beat earnings estimates and raised guidance on strong AI chip demand and the stock is up 8% pre-market and boosting Nasdaq and S&P 500 futures.

However, the “non-tech” parts of the market are flat to down as investors digest Wednesday’s disappointing economic data.

Today another AI driven rally in tech, following the NVDA earnings, should help support markets.  But, away from tech, markets will be focused on Jobless Claims (242K) and Durable Goods (E: -4.0%), and again the key here is stability, in that the data doesn’t show a sudden deterioration in activity (so spike in claims, drop in Durable Goods) or extreme strength (which would undo yesterday’s Treasury yield decline and weigh on the markets).

What Is “R Star” and Why Is It Important?

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What’s in Today’s Report:

  • What is “R*” and Why Is It Important?
  • Palo Alto Shares Rip Higher by 15%, Sparking Tech Rally – Chart

Stock futures are higher this morning with mega-cap tech shares extending this week’s strong advance following news that SoftBank’s Arm semiconductor unit has filed for the largest U.S. IPO in 2 years after the close yesterday while traders await NVDA earnings tomorrow.

Overseas, the PBOC set the strongest yuan fixing on record overnight which has helped the currency stabilize and that is contributing to risk-on money flows this morning.

There were no other market moving headlines overnight and no notable economic reports were released.

Looking into today’s session, there is one economic report due out in the U.S. this morning: Existing Home Sales (E: 4.160 million) but it is unlikely to impact markets with traders primarily focused on tech so far this week.

There are two Fed speakers today: Barkin (7:15 a.m. ET) and Goolsbee (2:30 p.m. ET) and their commentary could move markets as markets look ahead to Fed Chair Powell’s remarks from Jackson Hole on Friday. Anything that sparks a further rise in Treasury yields could pour cold water on this week’s tech rally which is basically entirely responsible for the week-to-date gains in the broader equity markets.

How to Explain the Current Pullback to Clients & Prospects

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What’s in Today’s Report:

  • How to Explain the Current Pullback to Clients & Prospects
  • Weekly Market Preview:  Will Treasury Yields Stabilize? (That’s the Key to Ending This Pullback)
  • Weekly Economic Cheat Sheet:  Important Growth Updates and Powell Speech on Friday

Futures are modestly higher thanks to more evidence of global disinflation and despite another round of underwhelming Chinese stimulus.

German PPI declined -6.0% y/y vs. (E) -5.1% y/y and that’s serving as a reminder that inflation is still falling globally.

In China, officials cut the Loan Prime Rate less than expected (-10 bps vs. (E) -15 bps) and while that will provide stimulus, it’s not alleviating concerns that the Chinese economy will be a headwind on global growth.

Today there are no economic reports and no Fed speakers (the Jackson Hole Fed conference is this week, so speakers will increase throughout the week culminating with Powell on Friday).  As such, Treasury yields will remain a short-term influence on stocks.  Yields and futures are higher this morning but if yields extend the rally throughout the day, don’t be surprised if stocks give back these early gains.

Tom Essaye Quoted in MaketWatch on August 14th, 2023

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China-focused ETFs drop as country’s property woes highlight ‘recession risks in China are real’

Concerns about China’s economy increased Monday after Country Garden Holdings Co. suspended trading in some offshore bonds, “reminding investors of Chinese property market volatility from years ago and reinforcing that recession risks in China are real,” Tom Essaye, founder and president of Sevens Report Research, said in a note. He also cited “downbeat trade data out of China” last week, with imports and exports both missing estimates.

Click here to read the full article.