ASX Futures (SPI 200) imply the ASX 200 will open 21 points lower, down -0.31%.
Wall Street's rally takes a breather, US House Speaker Nancy Pelosi is expected to visit Taiwan despite China's warnings, Eurozone manufacturing data plummets into contraction and the US economy is projected to grow 1.3% in the third quarter.
Let’s dive in.
Tue 02 Aug 22, 8:34am (AEST)
|US 10 Yr T-bond||2.606||-1.36%|
Major US indices pulled back slightly after a wrath of underwhelming manufacturing PMIs - reminding investors that the global economy is slowing down and recession risks continue to grow.
US House of Representatives Speaker Nancy Pelosi plans to visit Taiwan despite repeated warnings from China. Chinese foreign ministry spokesperson Zhao Lijian said “we are fully prepared for any eventuality. The People’s Liberation Army will never sit by idly. China will take strong and resolute measures to safeguard its sovereignty and territorial integrity.”
7 out of 11 US sectors declined
Defensives including Staples, Industrials and Utilities outperformed
Discretionary outperformed benchmarks, up 0.5%
Energy fell an outsized -2.2% as oil prices tumbled
49% of US stocks advanced
57% of US stocks trade below their 200-day moving day average (57% on Monday, 68% a week ago)
Boeing (+6.1%) shares rallied after CNBC reported the Federal Aviation Administration approved revisions to allow the jet maker to resume deliveries of its 787 Dreamliner
Pinterest (+2.7%, after hours: +21.6%) shares rallied on better-than-feared user numbers, even as earnings missed analyst expectations
Global monthly active users fell -5% to 433m versus 431m expected
The result comes as no surprise given the gloomy results from social media names like Facebook parent Meta, Twitter and Snapchat
“The macroeconomic environment has created meaningful uncertainty for our advertiser partners,” the company warned
Activision Blizzard (+0.2%, after hours: +0.6%) reported quarterly revenues of US$1.64bn, down -28.7% compared to a year ago. The company is still waiting for its US$69bn Microsoft takeover to close
According to Bank of America, 279 S&P 500 companies comprising 71% of the index earnings have reported. 67% beat earnings per share (EPS) and 62% beat revenue expectations.
EPS growth was 5.7%, but excluding the energy sector, EPS growth was -4.2%.
US corporate earnings we’re watching next week:
Tuesday: Caterpillar, Advanced Micro Devices, Airbnb, PayPal, Starbucks, Uber
Thursday: Alibaba, Block, Beyond Meat, Virgin Galactic
China manufacturing PMI unexpectedly fell to 50.4 in July from 51.7 in June
Consensus expected a reading of 51.5
The 50 pt level separates contraction from expansion
“The weaker-than-expected July PMI data confirmed our concerns on persistent headwinds facing the Chinese economy, even though the worst shocks from COVID-19 are already behind us,” said Bank of America, the AFR reported
German retail sales plummeted -8.8% year-on-year in June, down from 1.1% in May
Biggest year-on-year slump since 1980 as consumers cut back on non-essential goods such as furniture and clothing
German manufacturing PMI fell to 49.3 in July from 52 in June
"Goods producers' expectations turned negative back in March and have deteriorated in almost every month since as downside risks to the sector's outlook continue to build," noted S&P Global
"The potential for a shortage in gas supplies has German manufacturers seriously worried about the outlook for production in the coming year,"
Eurozone manufacturing PMI fell to 49.8 in July from 52.1 in June
First decline below the crucial 50 point mark since May 2020
“Eurozone manufacturing is sinking into an increasingly steep downturn, adding to the region’s recession risks,” said Chris Williamson, Chief Business Economist at S&P Global
US manufacturing PMI was steady at 52.2 in July from 52.7 in June
Still the lowest PMI reading since June 2020
"The U.S. manufacturing sector continues expanding — though slightly less so in July — as new order rates continue to contract, supplier deliveries improve and prices soften to acceptable levels,” said Timothy Fiore, Chair of the Institute for Supply Management
US Atlanta Fed GDPNow model estimates real GDP growth of 1.3% in the third quarter, down from 2.1% a week ago
Iron ore futures fell -0.54% to US$114.35. The rally from US$100 is taking a breather after a meeting with China’s top leaders did not announce any new stimulus measures and only pointed to broader directions to stabilise the property market
Oil tumbled after most European manufacturing PMIs came in well-below expectations and in contraction territory
Gold continues to climb higher now that Treasury yields have peaked and the US dollar is trending lower, on a five-day losing streak
Tuesday, 02 August 2022
Tuesday, 02 August 2022
|Lithium & Battery Tech||74.39||+1.45%|
|Aerospace & Defense||103.8||+0.75%|
|Robotics & AI||22.52||+1.11%|
Major US benchmarks inched lower overnight after a massive outperformance in July. If this is the beginning of a pullback, it'll be interesting to see what kind we get - a constructive pullback that further validates a bottom or was July just another 'bear market rally'.
The RBA is expected to hike interest rates by 50 bps at 2:30 pm AEST which could cause some fireworks for the local sharemarket.
The ASX 200 during previous hikes:
3 May -0.42%
25 bps hike versus 15 bps expected
7 June -1.53%
50 bps hike versus 25 bps expected
5 Jul +0.25%
50 bps in-line with expectations
With the lack of overnight catalysts, aren't that many interesting sectors to watch.
The Lithium & Battery Tech ETF has been grinding higher, closing above the 200-day moving average and having a crack at the trendline.
Interesting quote from Fortune 500 US manufacturer Stanley Black & Decker CEO, "we have seen commodities pull back significantly, except for lithium ... because there is still a high demand for batteries across many industries. But a lot of those spot prices have dropped back to levels that are closer to where they were at the beginning of the year."
Oil prices pulled back sharply with Brent Crude back below US$100 and WTI at US$93.
Investors have shifted their focus from tight supply to deteriorating short-term demand amid the wrath of poor manufacturing data from Europe and China.
Production increase announcements from Devon Energy, Exxon and Chevron added further insult to injury.
There's something about the shape of the US Jets ETF chart I can't quite put my finger on.
It's interesting because travel agencies like Flight Centre (ASX: FLT) and Webjet (ASX: WEB) charts are rather weak (struggling to close above the 20-day, moving averages are still downward trending, trading at the lower bound of recent ranges).
But a carrier like Qantas (ASX: QAN) is trying to break out.
ASX corporate actions occurring today:
Dividends paid: None
Issued shares: A4N, AIQ, AVA, BIO, BLG, BSA, CIA, COH, CZL, DVP, EMH, EMN, FGR, FIN, GSN, GSR, HYD, IBX, IVZ, KMT, LKE, LRS, MDR, MGU, NAB, OZZ, PPC, RHY, RMC, RUL, RYD, TOP, TRY, VHT, X2M, XTC
Other things of interest (AEST):
Australia Building Permits (June) at 11:30 am
Australia Home Loans (June) at 11:30 am
RBA Interest Rate Decision at 2:30 pm
Finance Writer & Social Media
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