Market Update
Tech Powered Stock Rebound Halted Amid Elevated Treasury Yields
Barry Adams
22 Aug, 2023
New York City
Stocks struggled and lacked direction and U.S. Treasury yields traded near elevated levels last seen 16 years ago.
Market averages lacked yesterday's momentum after investors worried about rising bond yields and its impact on the broader economy and the banking sector.
Higher yields are likely to increase undeclared losses in Treasury securities portfolio held by banks, and the rising rates will only force banks to raise more capital and direct a larger share of profits to bank's capital then for customer loans.
Tech stocks rallied on the expectations of new markets for AI driven devices and demand for advanced semiconductors.
Investors also reviewed the tight market for existing homes in July after home sales dropped to a six-month low.
Home Sales Dropped to 6-month Low In July
Existing home sales declined 2.2% from a year ago to a seasonally adjusted annual rate of 4.07 million, the National Association of Realtors reported Tuesday.
Elevated mortgage rates and limited home inventories are keeping the number of transactions down.
Single-family home sales declined 1.9% to 3.65 million units and condominium and coops dropped 4.5% to 0.45 million.
Median existing home prices rose 1.9% to $406,700, and stayed above $400,000 for the fourth time.
The inventory of existing homes rose 3.7%from the previous month to 1.1 million homes at the end of July, or about 3.3 months of unsold homes at the current monthly sales rate.
U.S. Indexes & Yields
The S&P 500 index traded down 0.3% to 4,387.55 and the Nasdaq Composite gained 0.06% to 13,505.87.
The yield on 2-year Treasury notes increased to 5.03%, 10-year Treasury notes inched higher to 4.32% and 30-year Treasury bonds edged up to 4.41%.
Crude oil increased $0.42 to $79.71 a barrel and natural gas prices decreased 5 cents to $2.54 a thermal unit.
U.S. Stock Movers
Lowe's Companies Inc increased 3.6% to $225.74 after the home improvement retailer reiterated its full-year outlook.
Revenue in the quarter ending on August 4 declined to $24.96 billion from $27.5 billion and net income decreased to $2.67 billion from $2.88 billion and diluted earnings per share fell to $4.56 from $4.68 a year earlier.
Dick's Sporting Goods Inc plunged 24.1% to $111.53 after the sporting goods retailer reported sharply lower earnings per share and the company blamed the shortfall to higher-than-usual theft.
Dick's said fiscal second quarter revenue was $3.22 billion and diluted earnings per share was $2.82, sharply lower than some analysts estimate of as high as $3.79.
The retailer also lowered its annual outlook.
Macy's Inc declined 14.2% to $12.66 after the department store operator reiterated its cautious full-year outlook.
Fabrinet soared 31.5% to $153.66 after the advanced manufacturing company reported better-than-expected quarterly results.
Revenue increased to $655.9 million compared to $587.9 million and net income increased to $60.8 million from $56.2 million and diluted earnings per share rose to $1.65 from $1.51 a year earlier.
Fabrinet's Board of Directors approved the repurchase of up to an additional $47.6 million of the company's ordinary shares, bringing the aggregate authorization under the existing share repurchase program to $294.8 million, with $100 million still available.
Bargain Hunting Lifted European Markets, Natural Gas Prices Surged Again
Bridgette Randall
22 Aug, 2023
Frankfurt
European markets traded higher following a tech rally in U.S. stocks in overnight trading.
Market indexes in London, Paris and Frankfurt advanced as investors reviewed the latest current account balance in the Euro Area.
Investors hunted for bargains in beaten down tech and energy stocks and overlooked rate hike worries and looming economic slowdown.
Euro Area Current Account Swung to Surplus In June
The Euro Area current account surplus surged to 36.8 billion in June from the revised 4.4 billion deficit in the month a year ago, the European Central Bank reported Tuesday.
The current account surplus rose to the highest level since September 2021 after the goods trade account transitioned to a surplus of 42.7 billion from the deficit of 8 billion in the month a year ago.
On the other hand, the primary income swung to a deficit of Є5.6 billion, from a surplus of Є0.4 billion the previous year, while the services surplus shrank to Є12.1 billion from Є18.9 billion.
Considering the first half of the year, the Euro Area registered a current account surplus of Є59.5 billion compared to a deficit of Є42.1 billion in the year earlier.
UK Government Borrowing Remained Elevated In July
UK public sector net borrowing excluding banks increased to £4.3 billion from £0.9 billion a year earlier, the Office for National Statistics reported Tuesday.
The government borrowing has declined in recent years but it was still the fifth largest July borrowing since record keeping began in 1993.
Total spending increased 9.2% to £97.2 billion as central government net investment soared by £15.9 billion, on the account of payments to the Bank of England Asset Purchase Facility Fund from HM Treasury under the indemnity agreement.
Moreover, the interest payable on central government debt increased by £1.5 billion to £7.7 billion, representing the highest interest payable in any July since monthly records began in April 1997.
On the other hand, total government receipts increased 5.4% to £92.9 billion, driven by increases in income and corporate taxes and VAT receipts.
Europe Indexes & Yields
The DAX index increased 1.1% to 15,770.14, the CAC-40 index rose 1.2% to 7,285.79 and the FTSE 100 index edged higher 0.8% to 7,306.02.
The yield on 10-year German bonds increased to 2.66%, French bonds traded higher to 3.19%, the UK gilts edged up to 4.67% and Italian bonds increased to 4.32%.
The euro edged lower to $1.088, the British pound to $1.271 and the U.S. dollar fetched 87.80 Swiss cents.
Brent crude increased $0.72 to $84.01 a barrel and the Dutch TTF natural gas increased €2.57 to €43.35 per MWh.
Europe Stock Movers
Mining companies traded higher after two weeks of volatile trading and investors recalibrated global demand for commodities.
Antofagasta, Anglo American and Glencore jumped between 2% and 6%.
Home builders in London trading also traded higher and Taylor Wimpey and Barratt Developments gained around 2%.
In Paris trading, STMicroelectronics jumped more than 3% and Capgemini, Dassault Systems, Credit Agricole and Essilor advanced more than 1.5% after the broad rally in market lifted large cap stocks.
Tech stocks rallied in Frankfurt and SAP, Infineon and Siemens Energy jumped more than 2%.
Buyers Snap Up Mega-cap Tech Stocks Despite Rising Bond Yields
Barry Adams
21 Aug, 2023
New York City
Tech stocks jumped in Monday's trading despite the yield on 10-year Treasury bonds traded at 16-year high.
Market indexes traded higher after falling for three weeks in a row, largely because of rate hike worries and uneven economic rebound in China.
Those worries were in full display after the U.S. Treasury yields advanced and the yield on 10-year Treasury bonds jumped above 5% for the first time since October and traded at a high not seen since 2007.
On Sunday, the People's Bank of China, Chinese stock market regulator and the agency of the finance ministry together announced the government's intention to offer more financial and regulatory reforms without specifics.
U.S. stocks have been under pressure for the last three weeks after the market rally driven by a narrow list of tech stocks hit valuation worries and longer-for-high rate path worries resurfaced.
Investors are recalibrating their views on the economy, labor market and the Fed's policy stance.
Despite the cooling of inflation, core inflation which excludes food and energy, is significantly higher than the Fed's preferred 2% level.
Investors are divided if the Fed's current stance of lifting rates in 25 basis points increment will bring down inflation to 2%, as most economists forecast a mild and short recession because of strong labor market conditions.
In Monday's trading, investors snapped up large cap tech stocks including Tesla, Microsoft, Meta, Nvidia, Intel and other semiconductor makers despite the rising Treasury bonds yields.
Home builders and real estate developers, energy explorers and refiners and consumer staples were among the leading decliners.
U.S. Indexes & Yields
The S&P 500 index traded up 0.7% to 4,399.77 and the Nasdaq Composite gained 1.6% to 13,497.59.
The yield on 2-year Treasury notes increased to 5.0%, 10-year Treasury notes inched higher to 4.34% and 30-year Treasury bonds edged up to 4.45%.
Crude oil increased $0.22 to $81.02 a barrel and natural gas prices increased 5 cents to $2.60 a thermal unit.
U.S. Stock Movers
Palo Alto Networks Inc jumped 14.5% to $242.84 after the cyber security and network infrastructure company reported better-than-expected quarterly results.
VMware Inc jumped 4.2% to $161.28 after Broadcom said it got the UK's Competition and Market Authority gave its final approval of the purchase of the cloud computing company.
Broadcom Inc jumped 2.4% to $845.25.
Earthstone Energy Inc soared 13.8% to $18.42 after the company agreed to be acquired by Permian Resources in an all-stock deal that valued the company at $4.5 billion, including the company's debt.
Each share of Earthstone common stock will be exchanged for 1.446 shares of Permian Resources common stock.
European Markets Rebounded, German Wholesale Index Cooled
European markets attempted a rebound on Monday after investors set aside worries of rising rates and looming economic slowdown.
Market indexes advanced in London, Paris and Frankfurt and bond yields hovered near recent highs on the worries that a possible rate hike in the U.S. in September could kick off another round of global rate hikes.
But for today, markets advanced after the producer price index in Germany declined more-than-expected 6.0% from a year ago in July, the Federal Statistics Office or Destatis reported Monday.
The larger-than-expected decline in inflation supported the market advance in Germany and in the Euro Area.
Investors also reviewed the latest rate increase in China and regulators promised more reforms on Sunday but failed to provide specifics.
Investors in Europe are looking for a slowdown in consumer spending and exports from manufacturing companies in Germany, France and Italy.
So far, exports from the region to the U.S. and China have held up, supporting the earnings growth outlook in 2023.
But elevated inflation and soaring prices of food, energy and homes have dented consumer appetite for large-ticket items.
On the economic calendar later this week, Italy's current account balance and jobless rate in France are on deck.
Europe Indexes & Yields
The DAX index increased 0.2% to 15,603.28, the CAC-40 index rose 0.5% to 7,198.06 and the FTSE 100 index edged lower 0.01% to 7,257.83.
The yield on 10-year German bonds increased to 2.67%, French bonds traded higher to 3.21%, the UK gilts edged up to 4.69% and Italian bonds increased to 4.36%.
The U.S. dollar traded near a 2-month high after the minutes of the meeting held on July 25-26 raised the prospect of another rate hike at the next policy meeting.
The euro edged lower to $1.091, the British pound to $1.271 and the U.S. dollar fetched 87.90 Swiss cents.
Brent crude decreased $0.53 to $84.24 a barrel and the Dutch TTF natural gas increased €4.37 to €40.78 per MWh.
Europe Stock Movers
In Frankfurt trading, SAP, BMW, MTU Aero Engines, and Infineon Technologies advanced more than 1%.
In London trading, mining stocks advanced after Chinese regulators and the People's Bank of China in a joint declaration announced to offer more financial and regulatory support.
Antofagasta, Anglo American and Glencore gained around 1% on the hopes of more stimulus for the moribund property market.
In Paris trading, luxury stocks were in focus on the hopes of China stimulus.
LVMH, Hermes, Christian Dior, Pernod Ricard, Kering SA and Richemont jumped between 1% and 2%.
Movers: Broadcom, Earthstone Energy, Permian Resources, Palo Alto Networks, VMware
Scott Peters
21 Aug, 2023
New York City
Palo Alto Networks Inc jumped 14.5% to $242.84 after the cyber security and network infrastructure company reported better-than-expected quarterly results.
Revenue in the fiscal fourth quarter ending in July rose 26% to $2.0 billion and net income increased $227.7 million from $3.3 million and diluted earnings per share jumped to 64 cents from 1 cent a year ago.
The company guided fiscal first quarter revenue in the range between $1.82 billion and $1.85 billion and diluted non-GAAP earnings per share between $11.15 and $1.17.
VMware Inc jumped 4.2% to $161.28 after Broadcom said it got the UK's Competition and Market Authority gave its final approval of the purchase of the cloud computing company.
Broadcom Inc jumped 2.4% to $845.25.
Earthstone Energy Inc soared 13.8% to $18.42 after the company agreed to be acquired by Permian Resources in an all-stock deal that valued the company at $4.5 billion, including the company's debt.
Each share of Earthstone common stock will be exchanged for 1.446 shares of Permian Resources common stock.
Tech Stocks Rebound Lift U.S. Markets, 10-year Treasury Yields Jump to 16-year High
Barry Adams
21 Aug, 2023
New York City
Stocks rebounded on the first day of a new week after tech stocks led gainers.
Market indexes traded higher after falling for three weeks in a row, largely because of rate hike worries and uneven economic rebound in China.
Those worries were in full display after the U.S. Treasury yields advanced to new 9-month highs and the yield on 10-year Treasury bonds jumped above 5% for the first time since October and traded at a high not seen since 2007.
On Sunday, the People's Bank of China, Chinese stock market regulator and the agency of the finance ministry together announced the government's intention to offer more financial and regulatory reforms without specifics.
U.S. stocks have been under pressure for the last week after the market rally driven by a narrow list of tech stocks hit valuation worries and rate path longer-for-high rate worries resurfaced.
Investors are recalibrating their views on the economy, labor market and the Fed's policy stance.
Despite the cooling of inflation, core inflation which excludes food and energy, is significantly higher than the Fed's preferred 2% level.
Investors are divided if the Fed's current stance of lifting rates in 25 basis points increment will bring down inflation to 2%, as most economists forecast a mild and short recession because of strong labor market conditions.
U.S. Indexes & Yields
The S&P 500 index traded up 0.5% to 4,389.97 and the Nasdaq Composite gained 1% to 13,430.29.
The yield on 2-year Treasury notes increased to 5.0%, 10-year Treasury notes inched higher to 4.33% and 30-year Treasury bonds edged down to 4.48%.
Crude oil increased $1.86 to $79.11 a barrel and natural gas prices increased 5 cents to $2.60 a thermal unit.
U.S. Stock Movers
Palo Alto Networks Inc jumped 14.5% to $242.84 after the cyber security and network infrastructure company reported better-than-expected quarterly results.
VMware Inc jumped 4.2% to $161.28 after Broadcom said it got the UK's Competition and Market Authority gave its final approval of the purchase of the cloud computing company.
Broadcom Inc jumped 2.4% to $845.25.
Earthstone Energy Inc soared 13.8% to $18.42 after the company agreed to be acquired by Permian Resources in an all-stock deal that valued the company at $4.5 billion, including the company's debt.
Each share of Earthstone common stock will be exchanged for 1.446 shares of Permian Resources common stock.
European Markets Rebounded After German Wholesales Index Cooled
Bridgette Randall
21 Aug, 2023
Frankfurt
European markets attempted a rebound on Monday after investors set aside worries of rising rates and looming economic slowdown.
Market indexes advanced in London, Paris and Frankfurt and bond yields hovered near recent highs on the worries that a possible rate hike in the U.S. in September could kick off another round of global rate hikes.
But for today, markets advanced after the producer price index in Germany declined more-than-expected 6.0% from a year ago in July, the Federal Statistics Office or Destatis reported Monday.
The larger-than-expected decline in inflation supported the market advance in Germany and in the Euro Area.
Investors also reviewed the latest rate increase in China and regulators promised more reforms on Sunday but failed to provide specifics.
Investors in Europe are looking for a slowdown in consumer spending and exports from manufacturing companies in Germany, France and Italy.
So far, exports from the region to the U.S. and China have held up, supporting the earnings growth outlook in 2023.
But elevated inflation and soaring prices of food, energy and homes have dented consumer appetite for large-ticket items.
On the economic calendar later this week, Italy's current account balance and jobless rate in France are on deck.
Europe Indexes & Yields
The DAX index increased 0.6% to 15,669.51, the CAC-40 index rose 1.0% to 7,236.23 and the FTSE 100 index edged higher 0.3% to 7,280.53.
The yield on 10-year German bonds increased to 2.67%, French bonds traded higher to 3.21%, the UK gilts edged up to 4.69% and Italian bonds increased to 4.36%.
The U.S. dollar traded near a 2-month high after the minutes of the meeting held on July 25-26 raised the prospect of another rate hike at the next policy meeting.
The euro edged lower to $1.091, the British pound to $1.271 and the U.S. dollar fetched 87.90 Swiss cents.
Brent crude increased $0.72 to $85.54 a barrel and the Dutch TTF natural gas increased €2.02 to €38.45 per MWh.
Stock Movers
In Frankfurt trading, SAP, BMW, MTU Aero Engines, and Infineon Technologies advanced more than 1%.
In London trading, mining stocks advanced after Chinese regulators and the People's Bank of China in a joint declaration announced to offer more financial and regulatory support.
Antofagasta, Anglo American and Glencore gained around 1% on the hopes of more stimulus for the moribund property market.
In Paris trading, luxury stocks were in focus on the hopes of China stimulus.
LVMH, Hermes, Christian Dior, Pernod Ricard, Kering SA and Richemont jumped between 1% and 2%.
European Markets Fall for Fourth Day and Third Week In a Row
Bridgette Randall
18 Aug, 2023
Frankfurt
European markets struggled after investor sentiment shifted from optimism to more caution.
Market averages declined in choppy trading as investors avoided stocks and lightened positions in some of their favorite sectors in the last nine months.
Market mood soured on the growing worries that the U.S. high-for-longer rates are likely to pose another challenge for global growth and that could start another cycle of rate hikes around the world.
Moreover, China's uneven economic rebound and worsening real estate market is likely to offer another hurdle for the global economic engine.
China's largest real estate company Evergrande Group filed for bankruptcy protection in New York as it restructures its international debt.
Just days ago Country Garden defaulted on its international debt and Sino-Ocean suspended trading on its several domestically denominated debts.
The fear of contagion spreading to more real estate companies and widening to other sectors, dragged market indexes in Hong Kong and Shanghai but also swept lower market indexes in Europe and Asia.
Closer to home, inflation in the Euro Area slowed to 5.3% in July from 5.5% in June, Eurostat confirmed on Friday and matched the rate estimated on July 31.
Core inflation, which excludes volatile food and energy prices, held steady at 5.5% as previously estimated.
Construction output declined 0.1% in June, reversing 0.2% rise in May, a separate report from Eurostat showed today.
UK retail sales fell more-than-expected 1.2% on a monthly basis in July, reversing an 0.6% increase in June.
UK retail sales declined for the first time in four months.
On a yearly basis, the fall in overall retail sales deepened to 3.2% from 1.6% in June.
Europe Indexes & Yields
The DAX index decreased 0.7% to 15,574.26, the CAC-40 index fell 0.4% to 7,164.11 and the FTSE 100 index declined 0.7% to 7,262.43.
The yield on German government bonds traded at a one-month high, lifting yields in the region for other nations as traders assessed inflation risks.
The yield on 10-year German bonds decreased to 2.62%, French bonds traded lower to 3.16%, the UK gilts edged down to 4.67% and Italian bonds decreased to 4.32%.
The U.S. dollar traded near a 2-month high after the minutes of the meeting held on July 25-26 raised the prospect of another rate hike at the next policy meeting.
The euro edged lower to $1.08, the British pound to $1.267 and the U.S. dollar fetched 88.18 Swiss cents.
Brent crude increased $0.72 to $84.84 a barrel and the Dutch TTF natural gas decreased €0.90 to €35.93 per MWh.
Stock Movers
Novartis AG declined about 0.6% to CHF 89.36 after the Swiss drug maker said it plans to spin off its around October 4.
Mining companies Antofagasta, Anglo American and Glencore declined between 2% and 3% after China's largest real estate company Evergrande Group filed for bankruptcy protection in New York.
Suse SA soared 60% to €15.36 after the company said it plans to delist its stock from the Frankfurt Stock Exchange.
Movers: Cisco Systems, CVS Healthcare, Walmart
Scott Peters
17 Aug, 2023
New York City
Cisco Systems Inc rose 3.8% to $55.02 after the networking gear maker reported better-than-expected revenue and earnings in its latest quarter.
Revenue in the fiscal fourth quarter ending in July increased 16% to $15.2 billion from $13.1 billion and net income rose to $4 billion from $2.8 billion and diluted earnings per share increased to 97 cents from 68 cents a year ago.
For the full-year fiscal 2023, revenue increased 11% to $57 billion from $51.5 billion and net income rose to $12.6 billion from $11.8 billion and diluted earnings per share increased to $3.07 from $2.82 a year ago.
The networking company guided revenue in the fiscal first quarter 2024 between $14.5 billion and $14.7 billion and GAAP earnings per share between 79 cents and 84 cents.
Walmart Inc declined 1.4% to $156.95 despite the retailer reporting better-than-expected quarterly results.
Revenue in the second quarter increased 5.7% to $161.6 billion and net income advanced to $7.9 billion from $5.1 billion and diluted earnings per share rose to $2.92 from $1.88 a year ago.
Walmart U.S. sales increased 5.7% to $110.9 billion and comparable sales excluding fuel increased 6.4% after number of transactions rose 2.9% and average ticket size increased 3.4%.
The company guided third quarter revenue to increase 3% and adjusted earnings per share between $1.45 and $1.50 and revenue growth in fiscal year 2024 between 4.0% and 4.5% and adjusted earnings per share between $6.36 and $6.46.
CVS Health Corp decreased 9.5% to $66.10 after Blue Shield of California dropped the company's pharmacy services.
The company said it will partner with Cost Plus Drug Company and Amazon pharmacy services to save drug costs for its 5 million members.
Market Averages Fall Third Week With Rising Treasury Yields
Barry Adams
17 Aug, 2023
New York City
Activities in bonds drove the sentiment in the stock market as investors reassess Fed's next move and review rate path possibilities.
The yield on 10-year U.S Treasury bonds jumped to the highest level since October and hovered near 4.3% after investors assessed rates to go higher at the next Fed's meeting on September 19.
Popular market averages have been on the downhill for the third week in a row on the rate hike worries and looming recession.
Investors have been debating how high rates have to go and how long rates have to be high before inflation comes down to the 2% level preferred by the Federal Reserve.
The debate has roiled stocks in the last three weeks after the market rally of nine months came to a halt as investors focused on stretched valuations and rising Treasury yields.
Jobless claims decreased 11,000 by 239,000 from the previous week's upwardly revised 250,000 claims, the Department of Labor reported Thursday in its weekly report.
Investors also reviewed the latest earnings from several companies including Cisco and Walmart.
U.S. Indexes & Yields
The S&P 500 index traded down 0.04% to 4,402.60 and the Nasdaq Composite fell 0.5% to 13,408.40.
The yield on 2-year Treasury notes increased to 4.97%, 10-year Treasury notes inched higher to 4.30% and 30-year Treasury bonds edged down to 4.32%.
Crude oil increased $1.06 to $80.54 a barrel and natural gas prices increased 6 cents to $2.65 a thermal unit.
U.S. Stock Movers
Cisco Systems Inc rose 3.8% to $55.02 after the networking gear maker reported better-than-expected revenue and earnings in its latest quarter.
Walmart Inc declined 1.4% to $156.95 despite the retailer reporting better-than-expected quarterly results.
CVS Health Corp decreased 9.5% to $66.10 after Blue Shield of California dropped the company's pharmacy services.
The company said it will partner with Cost Plus Drug Company and Amazon pharmacy services to save drug costs for its 5 million members.
Europe Movers: Aegon, BAE Systems, Geberit, GN Store Nord, Rank Group
Inga Muller
17 Aug, 2023
Frankfurt
European markets struggled and bond yields rose following the rising expectations of another rate hike in the U.S.
The DAX index increased 0.05% to 15,782.45, the CAC-40 index fell 0.05% to 7,257.09 and the FTSE 100 index fell 0.2% to 7,340.56.
The yield on German government bonds traded at a one-month high, lifting yields in the region for other nations as traders assessed inflation risks.
The yield on 10-year German bonds increased to 2.68%, French bonds traded higher to 3.22%, the UK gilts edged up to 4.60% and Italian bonds increased to 4.39%.
The U.S. dollar traded near a 2-month high after the minutes of the meeting held on July 25-26 raised the prospect of another rate hike at the next policy meeting.
BAE Systems declined 4.5% to 961.40 pence after the company said it agreed to acquire aerospace business of Ball Corp for $5.55 billion in cash.
Geberit AG declined 4.5% to CHF 445.60 after the Swiss plumbing supplies company lowered its 2023 outlook.
Aegon NV declined 3.2% to €4.81 after the Dutch insurer swung to a net loss in the first-half of 2023.
Rank Group declined 1.5% to 88.10 pence after the gambling company said revenue in the fiscal year 2023 jumped 5.9% but reported a statutory net loss on the account of higher impairment charges.
GN Store Nord plunged as much as 20% and recovered to a loss of 7.9% to DKK 152.30 after the hearing aid company said marketing conditions are challenging and cited macroeconomic headwinds.
European Bond Yields Perked Up and U.S. Dollar Traded at 2-month High
Bridgette Randall
17 Aug, 2023
Frankfurt
European markets struggled to advance in the face of growing U.S. rate path uncertainties and sluggish economic recovery in China.
In cautious trading, stocks lacked direction and bond yields rose and the euro and the pound edged lower on the worries that the U.S. rates are likely to go higher.
The latest minute of the Fed's policy meeting on July 25-26 showed that several participants were concerned about the elevated inflation despite multiple rate hikes.
Policymakers worried that interest rates may have to be revised higher to bring down inflation which has stayed above the Fed's preferred rate of 2% despite eleven rate hikes over the last fifteen months.
Europe Indexes & Yields
The DAX index increased 0.05% to 15,782.45, the CAC-40 index fell 0.05% to 7,257.09 and the FTSE 100 index fell 0.2% to 7,340.56.
The yield on German government bonds traded at a one-month high, lifting yields in the region for other nations as traders assessed inflation risks.
The yield on 10-year German bonds increased to 2.68%, French bonds traded higher to 3.22%, the UK gilts edged up to 4.60% and Italian bonds increased to 4.39%.
The U.S. dollar traded near a 2-month high after the minutes of the meeting held on July 25-26 raised the prospect of another rate hike at the next policy meeting.
The euro edged lower to $1.081, the British pound to $1.277 and the U.S. dollar fetched 87.87 Swiss cents.
Brent crude increased $0.87 to $84.34 a barrel and the Dutch TTF natural gas increased €0.82 to €38.61 per MWh.
Stock Movers
BAE Systems declined 4.5% to 961.40 pence after the company said it agreed to acquire aerospace business of Ball Corp for $5.55 billion in cash.
Geberit AG declined 4.5% to CHF 445.60 after the Swiss plumbing supplies company lowered its 2023 outlook.
Aegon NV declined 3.2% to €4.81 after the Dutch insurer swung to a net loss in the first-half of 2023.
Rank Group declined 1.5% to 88.10 pence after the gambling company said revenue in the fiscal year 2023 jumped 5.9% but reported a statutory net loss on the account of higher impairment charges.
GN Store Nord plunged as much as 20% and recovered to a loss of 7.9% to DKK 152.30 after the hearing aid company said marketing conditions are challenging and cited macroeconomic headwinds.
Rate Hike Worries Resurfaced After Fed Minutes, Nasdaq Dropped 1%
Boris Petrov
16 Aug, 2023
New York City
Market averages on Wall Street traded down after rate path worries resurfaced.
The S&P 500 and the Nasdaq Index declined around 1% after investors reviewed the Fed's minutes of meeting conducted in July.
Policymakers decided to increase the rate hike by 25 basis points at the end of two-day meeting in mid-July but many market participants forecast the Fed to pause for a while.
But the minutes of the latest meeting showed that most participants worried that inflation is too high and rates may have to be lifted to curb economic activities.
“With inflation still well above the Committee’s longer-run goal and the labor market remaining tight, most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy,” Fed's minutes of meeting noted after the rate decision.
After the rate increase, Fed funds rate range was increased 25 basis points to between 5.25% and 5.0%.
Despite the multiple rate hikes, inflation has still hovered well above the Fed's 2% target rate and several policy committee members noted.
“In discussing the policy outlook, participants continued to judge that it was critical that the stance of monetary policy be sufficiently restrictive to return inflation to the Committee’s 2 percent objective over time,” the latest minutes of the meeting noted.
Several policy members expressed the view that the economic outlook remains highly uncertain and the full impact of the cumulative rate hike is not fully felt by the economy.
U.S. Indexes & Yields
The S&P 500 index traded down 0.8% to 4,404.33 and the Nasdaq Composite fell 1.1% to 13,474.63.
The yield on 2-year Treasury notes increased to 4.98%, 10-year Treasury notes inched higher to 4.26% and 30-year Treasury bonds edged down to 4.38%.
Crude oil increased $1.86 to $79.11 a barrel and natural gas prices decreased 6 cents to $2.66 a thermal unit.
U.S. Stock Movers
Target Corp increased 3% to $128.75 despite the company reporting revenue that fell short of market expectations and the company lowering earnings for the full-year.
TJX Companies Inc jumped 4.1% to $89.31 after the discount retailer reported second quarter adjusted earnings of 85 cents and revenue of $12.76 billion.
VinFast Auto declined 19% to $30.11, a day after the stock soared more than 250% after the company completed its listing on the Nasdaq through a merger with the SPAC Black Spade.
Intel Corp declined 3.5% to $33.53 after the company decided to terminate its merger agreement to acquire Tower Semiconductor.
As a part of the merger agreement, Intel will pay $353 million to Tower Semiconductor.
Tower Semiconductor declined 10.7% to $30.17.
Europe Movers: Admiral Group, Alcon, Carlsberg, Essentra, Mining Companies
Inga Muller
16 Aug, 2023
Frankfurt
European markets rebounded after the Euro Area industrial production unexpectedly rose and second quarter GDP expanded.
The DAX index increased 0.2% to 15,802.60, the CAC-40 index rose 0.2% to 7,279.98 and the FTSE 100 index fell 0.5% to 7,357.73.
The yield on German government bonds traded at a one-month high, lifting yields in the region for other nations as traders assessed inflation risks.
Carlsberg AS declined 2.4% to DKK 996.80 despite the company slightly lifting its 2023 annual outlook.
Alcon AG declined 1.1% to CHF 69.88 despite the Swiss eye-care firm reporting an increase in second quarter revenue and the company lifting its 2023 full-year outlook.
Mining companies extended losses for the second week in a row after China reported weak new home sales data today following weak retail sales, industrial production and unemployment data a day earlier.
Anglo American declined and extended this year's loss to 39% and Glencore fell 0.1% and 23% respectively.
Admiral Group Plc soared 5.8% to 2,327.0 pence after the insurance company reported a rise in first-half profit.
Essentra PLC declined 0.9% to 154.40 pence after the plastics and fiber products maker said first-half revenue declined 5.5% from a year ago.
Euro Area Economy Expanded In Second Quarter, UK Inflation Eased
Bridgette Randall
16 Aug, 2023
Frankfurt
European markets traded higher and investors reviewed the latest industrial production data in the Euro Area.
Industrial production in the eurozone unexpectedly rose 0.5% in June from the upwardly revised flat reading in the previous month, the Eurostat reported Wednesday.
In a separate report the statistical agency for the currency union confirmed that the economy expanded 0.3% in the second quarter from the previous quarter, matching the expectations set by some economists.
The UK consumer price inflation slowed to 6.8% in July from 7.9% in June, following weaker energy prices, the Office for National Statistics reported Wednesday.
Despite the weakening of the overall inflation, core inflation stayed at 6.9%, sending a signal to investors that the Bank of England may have to continue with its aggressive rate hike stance.
Europe Indexes & Yields
The DAX index increased 0.2% to 15,802.60, the CAC-40 index rose 0.2% to 7,279.98 and the FTSE 100 index fell 0.5% to 7,357.73.
The yield on German government bonds traded at a one-month high, lifting yields in the region for other nations as traders assessed inflation risks.
The yield on 10-year German bonds decreased to 2.64%, French bonds traded lower to 3.19%, the UK gilts edged down to 4.60% and Italian bonds decreased to 4.30%.
The euro edged lower to $1.091, the British pound to $1.271 and the U.S. dollar fetched 88.06 Swiss cents.
Brent crude increased $0.25 to $85.28 a barrel and the Dutch TTF natural gas decreased €0.80 to €38.01 per MWh.
Stock Movers
Carlsberg AS declined 2.4% to DKK 996.80 despite the company slightly lifting its 2023 annual outlook.
Alcon AG declined 1.1% to CHF 69.88 despite the Swiss eye-care firm reporting an increase in second quarter revenue and the company lifting its 2023 full-year outlook.
Mining companies extended losses for the second week in a row after China reported weak new home sales data today following weak retail sales, industrial production and unemployment data a day earlier.
Anglo American declined and extended this year's loss to 39% and Glencore fell 0.1% and 23% respectively.
Admiral Group Plc soared 5.8% to 2,327.0 pence after the insurance company reported a rise in first-half profit.
Essentra PLC declined 0.9% to 154.40 pence after the plastics and fiber products maker said first-half revenue declined 5.5% from a year ago.
Market Averages Dropped 1% After Fitch Signaled Possible Bank Downgrades
Barry Adams
15 Aug, 2023
New York City
Market averages in New York closed down after banks led decliners and lingering uneven recovery in China dominated market sentiment.
The S&P 500 and the Nasdaq Composite indexes declined as much as 1.5% after China's retail sales and industrial output rose less-than-expected and jobless rate rose in July.
The ongoing weakness in the property market is at the heart of China's uneven economic recovery and weakness in imports of commodities and energy products.
Property buyers are increasingly staying on the sidelines on the expectation of further price declines, further denting the market liquidity and exacerbating property developer's debt-heavy balance sheets.
In other news in Asia, Japan's second quarter GDP soared at an annual pace of 6% largely because of a jump in net exports and sharp rebound in international tourist arrivals.
Business investment was flat and private consumption unexpectedly declined 0.5% in the second quarter.
Private consumption accounts for about 50% of Japan's economy and domestic demand is negatively impacted by the weakening of yen which is lifting the cost of imports.
Closer to home, preliminary U.S. retail and food services sales rose 0.7% in July, and sales rose for the fourth month in a row.
Seasonally adjusted but not adjusted for price inflation, retail sales rose 3.2% from a year earlier, the U.S. Commerce Department reported Tuesday.
The rise in retail sales showed resilient consumer spending despite rate hikes and price increases but investors worry lagging wage growth may finally catch up with consumers amid rising personal debts.
Banks dropped between 2% and 3% after Fitch Ratings signaled a possible downgrade for the banking sector and a possible rating downgrades for several banks, including large banks.
Bank of America, BONY Mellon, Citigroup and JPMorgan Chase fell between 2% and 3%.
Investors are worried that a rating cut will further increase cost of capital for banks and weaken net interest margin and may even cut off some banks from their abilities to borrow in the bond market.
U.S. Indexes & Yields
The S&P 500 index traded down 1.2% to 4,437.1786 and the Nasdaq Composite fell 1.2% to 13,631.05.
The yield on 2-year Treasury notes increased to 4.95%, 10-year Treasury notes inched higher to 4.21% and 30-year Treasury bonds edged down to 4.31%.
Crude oil increased $1.36 to $81.44 a barrel and natural gas prices decreased 6 cents to $2.66 a thermal unit.
U.S. Stock Movers
Home builders were in focus after Berkshire Hathaway acquired positions in NVR, Lennar and DR Horton, according to a regulatory filing.
DR Horton gained 2.2% to $125.97, Lennar jumped 0.6% to $124.61 and NVR gained 1.7% to $6,262.79 after the diversified conglomerate Berkshire Hathaway took stakes in home builders.
According to a regulatory filing with the SEC, Berkshire acquired a $726 million stake in DR Horton, $70 million in NVR and $17.2 million in Lennar.
Discover Financial Services dropped 7.7% to $94.66 after the company announced the resignation of chief executive Roger Hochschild.
The company's board appointed John Owen as interim president and chief executive and Hochschild will remain as an advisor through the end of the year.
Home Depot Inc jumped 2.2% to $126.0 after the do-it-yourself retailer reported sales declined 2% to $42.9 billion and comparable sales in the period across the company and in the U.S. declined 2%.
Sales were under pressure after customers delayed bid-ticket purchases.
Net income in the quarter declined 9.9% to $4.6 billion from $5.2 billion and diluted earnings per share fell to $4.65 from $5.05 a year ago.
The retailer reaffirmed its 2023 sales and comparable sales to decline between 2% and 5% and diluted earnings per share to fall between 7% and 13% from a year earlier.
European Markets Turn Volatile After Weak China Data
European markets inched higher amid growing worries of worsening economic conditions in China.
European bond yields edged up and UK gilts traded above 4.6% for the second day in a row and French bond yield jumped stayed above 3% for the second week in a row.
The ruble rebounded after the Bank of Russia lifted its key lending rate after the currency plunged in the previous session.
The central bank lifted interest rates by 350 basis points to 12% to shore up the currency after an emergency meeting.
The ruble rebounded from as low as 102 against the U.S. dollar to 95.56 after the rate hike announcement.
Investors are also awaiting U.S. retail sales data for July and the last batch of earnings from major retailers and tech companies.
Japan GDP Expanded On Positive International Trade
Japan's GDP expanded for the second quarter in a row on rising exports and falling imports, the government data showed.
GDP in the second quarter accelerated to 1.5% from the upwardly revised 0.9% increase in the first quarter.
The economy has been on the mend despite the weak consumer spending but it was the international trade that drove most of the gain.
Exports in the second quarter rose 3.2% from the previous quarter and imports fell 4.3% in the period, contributing 1.8 percentage point growth.
Market sentiment was cautious after China reported weaker-than-expected retail sales, investment and unemployment data.
The People's Bank of China lowered its key lending rates as the property market faces confidence crisis and byers stayed on the sidelines hoping prices to fall further.
China Cut Rates After Weak Economic Data Show Deepening Property Market Stress
The People's Bank of China unexpectedly lowered its one-year medium term lending facility rate by 15 basis points to 2.5%.
The central bank also lowered its seven-day reverse repo rate by 10 basis points to 1.8%, responding to weakening economic backdrop.
Property investments declined at a faster pace in January to July of 8.5% after falling at 7.9% in January to June, the National Bureau of Statistics reported Tuesday.
Weak property investment dragged down growth in fixed-asset investment to 3.4% in the first seven months to July from 3.8% in June.
Property accounts for one-fifth of all fixed-asset investment and contributes to about 14% of GDP growth.
Private investment continues to remain subdued and declined 0.5% in the first seven months, compared to an increase of 7.6% by state owned enterprises.
From a year ago, industrial production increased 3.7% in July, slower than 4.4% in June and retail sales slowed to 2.5% in July from 3.1% increase in June from a year ago.
Urban jobless rate rose to 5.3% in July from 5.2% in June and the statistical agency said it will no longer provide youth jobless rate data.
Youth unemployment rate among 16 to 24 years rose to record high of 21.3% in June from 20.8% in May.
Europe Indexes & Yields
The DAX index increased 0.9% to 15,767.28, the CAC-40 index fell 1.1% to 7,267.70 and the FTSE 100 index fell 1.6% to 7,389.64.
The yield on German government bonds traded at a new one-month high, lifting yields in the region for other nations as traders assessed inflation risks.
The yield on 10-year German bonds increased to 2.67%, French bonds traded higher to 3.22%, the UK gilts edged up to 4.62% and Italian bonds increased to 4.33%.
The euro edged lower to $1.093, the British pound to $1.261 and the U.S. dollar fetched 87.76 Swiss cents.
Brent crude decreased $1.01 to $85.07 a barrel and the Dutch TTF natural gas decreased €4.32 to €38.81 per MWh.