Is the rally finally over?

• Corporate Earnings news
• Global market indices
• Currencies
• Cryptocurrencies
• Fixed Income
• Commodity sector news
• Key data to move markets this week
• Global macro updates

Corporate Earnings News

According to Refinitiv I/B/E/S data, the 23Q2 Y/Y blended earnings growth estimate is -5.4%. If the energy sector is excluded, the growth rate for the index is 0.7%. Of the 334 companies in the S&P 500 that have reported earnings to date for 23Q2, 79.9% reported above analyst expectations. This compares to a long-term average of 66%. The 23Q2 Y/Y blended revenue growth estimate is -0.1%. If the energy sector is excluded, the growth rate for the index is 3.7%.

Corporate earning calendar 3 August - 10 August 2023

Thursday: Airbnb, Alibaba Group Holdings, Amazon, Amgen, Apple, Ball Corp., Block Inc., Coinbase Global, ConocoPhillips, EOG Resources, Fiverr International, Gilead Sciences, Microchip Technologies, Moderna, Monster Beverage, Regeneron Pharmaceuticals, Southern Co., Stryker Corporation, Sempra Energy, Consolidated Edison, Fortinet, Kellog, Expedia Group

Friday: Enbridge, Dominion Energy, Corebridge Financial

Monday: Activision Blizzard, Arista Networks, Lucid Group, Palantir Technologies, Pinterest, Viatris, KKR & Co., Tyson Foods, Celanese Corporation, Skyworks Solutions

Tuesday: AMC Entertainment, Barrick Gold, Eli Lilly and Co., Jackson Financial, Marathon Digital Holdings, Plug Power, Rivian Automotive, Take-Two Interactive Software, Twilio, Upstart Holdings, UPS, Duke Energy, Sun Life Financial, Wynn Resorts, Celsius Holdings, InterContinental Hotels Group, Toast

Wednesday: Illumina, Walt Disney Company, Manulife Financial Corp., The Trade Desk, Charles River Laboratories International

Thursday: Novo Nordisk, Wheaton Precious Metals, News Corp.

US Stock Indices

Nasdaq 100 -2.43% MTD and +40.54% YTD
Dow Jones Industrial Average +0.20% MTD and +7.49% YTD
NYSE -1.54% MTD and +6.52% YTD
S&P 500 -0.27% MTD and +19.20% YTD

The VIX index, known as Wall Street’s “fear gauge” rose to the highest level since May as equities continued to fall while bond yields rallied over the past week on signs of a still resilient US economy. The Bank of Japan’s adjusting its yield curve control (YCC) policy on July 28 removed the floor on bonds which has also helped lead to rising yields.

Mega caps: A generally poor week for mega caps as consumer spending on technology such as smartphones remained stubbornly weak amid slowing global economic growth with Alphabet, Apple, Microsoft, Tesla, Amazon, Meta Platforms and Nvidia all down.

Energy stocks had a generally poor week on concerns around lower demand due to weak Chinese growth and a slowdown in the Eurozone. However, energy tech and service providers continued to perform relatively well. Apa Corp (US), ConocoPhillips, Chevron, Phillips 66, Occidental Petroleum, EnergyFuels, Shell were down while Halliburton and Baker Hughes were up.

Materials and Mining stocks were mixed this week with Albemarle Corporation down despite a rise in its profit forecast, and Newmont Mining, Yara International, Nucor Corporation, Sibanye Stillwater, Freeport-McMoran, and DuPont de Nemours Inc. are all down. CF Industries Holdings is up on a better than expected Q2 EPS, while Mosaic has been relatively flat despite a fall in Q2 net income and missing estimates for earnings due to falls in Potash and Phosphorus net sales.

Albemarle Corporation, the world's largest producer of lithium, raised its 2023 profit forecast on Wednesday after reporting better-than-expected quarterly results and the company cited rising global appetite for the metal used to make electric vehicle batteries. It said it expects lithium demand to increase further due to the push to electrify much of the world's economy.

European Stock Indices

Stoxx 600 -2.33% MTD and +8.46% YTD
DAX -2.60% MTD and +15.06% YTD
CAC 40 -2.47% MTD and +12.96% YTD
IBEX 35 -3.24% MTD and +13.36% YTD
FTSE MIB -2.26% MTD and +22.22% YTD
FTSE 100 -1.79% MTD and +1.47% YTD

Other Global Stock Indices 

MSCI World Index -0.50% MTD and +16.22% YTD
Hang Seng -2.80% MTD and -1.33% YTD

Currencies

The USD continued to strengthen this week despite the US downgrade by Fitch. ADP National Employment Data showed a larger-than-expected increase in private payrolls of 324,000 jobs in July. This followed Tuesday’s JOLTS report which, despite showing a small decrease in job openings, noted increased quits. In short, the indicators are showing a still tight labour market and a resilient economy, thereby increasing the possibility that the Fed may seek to either raise rates again this year or hold for longer. The GBP fell against the USD this week despite the BoE raising rates another 25 basis points during its meeting today. Stirling is still +5.06% YTD against the USD. The EUR is +2.19% YTD against the USD.

Cryptocurrencies

Bitcoin -0.22% MTD and +75.8% YTD
Ethereum -0.56% MTD and +53.79% YTD

Cryptocurrencies, as risk sensitive assets, followed equities which have reacted badly to the US credit downgrade by Fitch this week.

Fixed Income

US 10-year yield to 4.07%.
German 10-year yield to 2.54%.
UK 10-year yield to 4.40%.

US Treasury yields gained this week on signs of a still tight labour market with strong private employment data and the announced refunding of the US government's maturing debt, amounting to $103 billion in Treasuries to refund roughly $84 billion in Treasury notes and bonds coming due on 15 August. The benchmark 10-year note reached its highest since November on Wednesday.. The rise in yields also came after ratings agency Fitch downgraded the US. government's credit rating to AA+ from AAA, citing an expected fiscal deterioration over the next three years and a rising debt burden.

Commodities

Gold futures to $1,971.70 an ounce.
Silver futures to $23.83 per ounce.
West Texas Intermediate crude to $79.81 a barrel.
Brent crude to $83.84 a barrel.

Gold prices held near three-week lows over the past week as strong US private payrolls data and job openings numbers suggested the US would likely have a soft landing, even if there was more monetary policy tightening. This boosted the USD and caused Treasury yields to rise, thus making gold less attractive. It is also expected that the decline in central bank purchases may continue and demand from tech companies is soft.

According to the Energy Information Administration, US oil crude stocks fell the most on record last week as exports topped 5 million barrels per day and refineries processed more crude. It said most of the fall in crude stocks came from a record drop in stockpiles held in the refining hubs of the US. Gulf Coast. Stocks there fell by a record 15.57 million barrels to 243.4 million barrels as refiners in the region processed the most crude since August 2022, the EIA said. Markets will be watching the results of this Friday’s OPEC+ meeting to see if members agree on any further cuts.

Note: As of 5 pm EDT 2 August 2023

Key data to move markets this week

EUROPE 

Thursday: Eurozone HCOB Composite and Services PMIs, German HCOB Composite and Services PMIs, Eurozone Producer Price Index, and a speech by ECB Executive Board member Fabio Panetta.
Friday: German Factory Orders and Eurozone Retail Sales.
Monday: German Industrial Production and Eurozone Sentix Investor Confidence.
Tuesday: German Harmonised Index of Consumer Prices.
Thursday: ECB Economic Bulletin.

UK

Thursday: S&P Global/CIPS Composite and Services PMIs, Bank of England Monetary Policy Decision, Report, a speech by BoE Governor Andrew Bailey, and Minutes.
Friday: A speech by BoE Chief Economist Huw Pill.
Monday: BRC Like-for-Like Retail Sales and a speech by BoE Chief Economist Huw Pill.

US

Thursday: S&P Global Composite and Services PMIs, Initial jobless claims, Challenger Job cuts, Nonfarm productivity, Factor Orders, ISM Service Employment,, ISM Services New Orders, ISM Services PMI, and ISM Services Prices Paid.
Friday: Nonfarm Payrolls, Average Hourly Earnings, Labour Force Participation, Unemployment Rate, and Underemployment rate.
Thursday: Initial jobless claims and CPI.

GLOBAL: 

Friday: OPEC+ meeting.

Global Macro Updates

The BoE’s continuing journey. The Bank of England raised rates another 25 basis points today to a fifteen year high. In a 6–3 vote, the MPC agreed to increase the Bank rate by 0.25 percentage points, to 5.25%. Two members preferred to increase the Bank rate by 0.5 percentage points, to 5.5%, and one member preferred to maintain the Bank rate at 5%. The BoE also released an updated Monetary Policy report.with new projections for activity and inflation.The new projections has the Bank rate on a path to a peak of just over 6% and averages just under 5.5% over the three-year forecast period, compared with an average of just over 4% for the equivalent period at the time of the May Report.

The UK has been struggling to bring down inflation. UK headline inflation dropped to 7.9% in the 12 months to June 2023, down from 8.7% in May. Core inflation remained sticky at an annualised 6.9% in June 2023 although it did fall from May's 31-year high of 7.1%. The “cost of living” crisis also seems to be abating somewhat as shop prices were 0.1% lower in July than in June and food price increases decelerated for the third month in a row to 13.4%, according to the BRC data. However, the UK still has the highest rate of inflation in the G7 and a still tight labour market although this is showing signs of loosening with the LFS unemployment rate rising to 4.0% in the three months to May. In its statement, the BoE left the option open for more restrictive policy, saying that their stance will remain “sufficiently restrictive for sufficiently long” to bring it back to the 2% target. The Committee continued to judge that the risks around the inflation forecast were skewed to the upside, reflecting the possibility that the second-round effects of external cost shocks on inflation in wages and domestic prices might take longer to unwind than they did to emerge.

Do US debt dynamics matter? The US was downgraded by the credit ratings agency Fitch late on Tuesday from triple A to double A plus. It said it expected fiscal deterioration over the next three years and that repeated debt ceiling disputes threaten the government's ability to pay its bills.Should markets really worry is the question on most investors minds? According to US Treasury Secretary Janet Yellen, the answer is no. She called it "entirely unwarranted" because it ignored improvements in governance metrics during the Biden administration and the country's economic strength. She said Fitch's "flawed assessment" was based on outdated data and failed to reflect improvements in US governance indicators. The US economy appears to be surprisingly resilient to the ongoing Fed monetary hiking cycle with the labour market showing limited signs of weakening. However, Fitch said that “The numbers speak for themselves.” Fitch forecasts US debt to reach 118% of gross domestic product by 2025. Richard Francis, the lead analyst on US sovereign ratings at Fitch, told CNN in an interview on Wednesday. that US debt makes up 113% (and growing) of its economic output, which Francis called “clearly pretty alarming.” In short, the concerns that the US federal budget is now a highly-levered, interest rate-exposed entity, have not been dealt with, regardless of who was in power (Trump or Biden) and unless and until that is dealt with, which is highly unlikely going into an election year, markets will be looking at other indicators to assess US risk levels.

The Eurozone slowdown continues. HCOB's final Composite Purchasing Managers' Index (PMI), seen as a good gauge of overall economic health, dropped to an eight-month low of 48.6 in July from June's 49.9. The headline services index fell to 50.9 from 52.0. On Tuesday it was revealed that the HCOB's final Eurozone manufacturing Purchasing Managers' Index (PMI), fell to 42.7 in July from June's 43.4, its lowest since May 2020. Demand fell sharply despite falling factory prices. The output prices index was down to a near 14-year low of 45.0 from 47. The ECB, which raised rates by another 25 basis points last week and said that it would continue to be data dependent moving forward, may have to balance the impact future rate rises would have on the Eurozone economy and the likelihood of inflation continuing to be unacceptably high.

Will Ether ETFs become a thing? According to Bloomberg news, half a dozen issuers have submitted applications for Ether-futures ETFs since Friday, according to documents filed with the US Securities and Exchange Commission (SEC). The applicants include Grayscale, VanEck, Bitwise, Volatility Shares, ProShares and Round Hill Capital. As noted by Proactiveinvestors.co.uk, Grayscale filed two applications, one for Grayscale Global Bitcoin Composite ETF and the other for Grayscale Ethereum Futures ETF. The latter will focus on what are called front-month Ether features, which take the shortest time to mature, trading on the Chicago Mercantile Exchange. However, Volatility Shares plans to list an ETF that invests in cash-settled contracts referencing ETH trading on the Chicago Mercantile Exchange, rather than investing directly in Ether itself. Another approach has been taken by ProShares, which plans to list a Short Ethereum Strategy ETF, which would invest in daily contracts that would profit from losses of the S&P CME Ether Futures index. The ProShares fund would gain as much value as the index loses and vice versa. It seems more firms are becoming hopeful that the SEC, with its at times contradictory definitions or understanding of whether crypto products are securities, may decide to accept crypto ETFs after the approval of Volatility Shares’ 2X Bitcoin Futures ETF and the prospect of the first spot-Bitcoin product in the US after BlackRock’s June filing.

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