U.S. Stocks Closed higher, China Property Woes Deepen and Argentina Devalues Peso

Barry Adams
14 Aug, 2023
New York City

Popular market averages rebounded after stocks scaled higher in the final hour of the session. 

In early trading, popular averages hovered near flatline and Treasury yields inched slightly higher as investors reviewed last week's market performance and awaited corporate earnings. 

But market indexes staged a reversal after one hour of trading and continued to advance in steady climb and never looked back as investors stepped up to buy familiar stocks in the tech space. 

But the on-again-off-again recession debate raged on Wall Street as investors focused on the looming global economic slowdown after China's property market woes worsened.  

In addition, domestic inflation worries lingered on as investors reviewed consumer price and wholesale price inflation last week showing a slight acceleration but staying near the 12-month lows.  

But the overall and core inflation are still significantly ahead of the Fed's 2% target level despite eleven rate hikes over the last fifteen months. 

Moreover, labor market conditions remain tight but wage prices are rising at moderate rates. 

The recent hike in crude oil prices and elevated home prices are sending alerts to policymakers that the overall inflation may be on the rise again in the months ahead.  

This week on the earnings front, Walmart, Target, Home Depot and Cisco are among 300 companies scheduled to release earnings. 

On the economic calendar, investors are awaiting July retail sales data and building permits, starts and completions data.  

 

Russian Ruble Extended Losses

The Russian ruble plunged to 101.0 against the U.S. dollar, and extended this year's decline to 38% on the growing list of negative factors. 

Rising government deficit, mismatch of imports and exports receipts and the expectations of weakening demand for energy from China and India contributed to the negative sentiment for the ruble. 

Russia's current account surplus plunged 85% in the period between January and July from a year ago, denting the sentiment further. 

 

Argentine Devalues Peso by 18% 

Argentine central bank devalued peso by 18% to 350 against the U.S. dollar and lifted interest rates by a whopping 21 percentage points to 118%. 

The central bank was forced to devalue after financial markets turned volatile and investors dumped stocks and currency following a surprise victory of far-right congressman Javier Milei in presidential primary  

Presidential primary winner Milei won about 30%, leading all other candidates after voters dumped traditional candidates as the resource rich nation lurches from one recession to another. 

 

U.S. Indexes & Yields 

The S&P 500 index traded up 0.4% to 4,489.80 and the Nasdaq Composite rose 0.8% to 13,788.33. 

The yield on 2-year Treasury notes increased to 4.96%, 10-year Treasury notes inched higher to 4.19% and 30-year Treasury bonds edged down to 4.29%. 

Crude oil increased $0.65 to $82.53 a barrel and natural gas prices increased 2 cents to $2.79 a thermal unit. 

 

U.S. Stock Movers 

U.S. Steel Corporation surged 26.9% to $28.76 after the steelmaker rejected a buyout offer of $7.3 billion from Cleveland-Cliffs over the weekend.  

Cleveland-Cliffs increased 2.5% to $14.99 after U.S. Steel said it is reviewing its strategic options. 

Tesla Inc decreased 2.3% to #237.10 after the electric vehicle maker announced additional savings in China to support faltering sales amid weaker-than-expected economic rebound.  

Nikola Corp declined 11.3% to $1.73 after the company recalled 209 electric trucks 

PayPal Inc increased 1.7% to $62.52 after the payment processing company's board appointed Intuit executive Alex Chriss as the new chief executive replacing long-time chief executive Dan Schulman in September. 

Schulman plans to remain as a director till the end of May 2024. 

 

European Markets Lacked Direction Amid Global Slowdown Worries 

European markets traded sideways and gains were muted after bond yields advanced for the second week in a row and commodities and crude oil prices edged lower. 

The benchmark indexes in Frankfurt, Paris and London traded higher in choppy trading on the hopes that inflation will stay near recent lows and the Euro Area economy may avoid a deeper recession. 

The rise in bond yields suggested that the bond market is looking for rates to go higher, contrary to the stock market expectations. 

German wholesale prices declined 2.8% in July after falling at an annual rate of 2.9% in June, the Federal Statistics Office reported Monday.  

Wholesale prices declined for the fourth month in a row and on a monthly basis prices fell 0.2%, matching the rate in June. 

 

Europe Indexes & Yields

The DAX index increased 0.5% to 15,904.25, the CAC-40 index rose 0.1% to 7,348.14 and the FTSE 100 index fell 0.2% to 7,507.15.  

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 2.60%, French bonds traded higher to 3.14%, the UK gilts edged up to 4.52% and Italian bonds increased to 4.22%.

The euro edged lower to $1.03, the British pound to $1.263 and the U.S. dollar fetched 87.73 Swiss cents.

Brent crude decreased $0.61 to $86.19 a barrel and the Dutch TTF natural gas decreased €0.87 to €34.43 per MWh.

 

Europe Stock Movers

Antofagasta, Glencore and Anglo America declined more than 1% on the no end in sight of property woes in China, reiterating fears that the expected rebound in Chinese demand is not likely to materialize. 

Weakening crude oil prices dragged energy companies Shell PLC, TotalEnergies and BP Plc down by 1 %. 

Adesso SE jumped 9.2% to €111.20 after the information processing outsourcing services company reported a rise in its first-half operating earnings and the company reiterated its 2023 outlook. 

Koninklijke Philips NV jumped 3.9% to €19.16 after the Dutch investment company Exor controlled by Italy-based Agnelli family invested $2.8 billion or 15% stake in the embattled healthcare technology company. 

 

Yen Crossed 145 and China Property Market Woes Worsens 

In Asia, markets were under pressure after the Japanese yen traded above 145 against the U.S. dollar and China's two best-known property developers missed bond payments. 

Country Garden halted trading in at least dozen on-shore bonds and the state-controlled Sino-Ocean suspended trading in debt notes due next year after the company missed interest payments of $21 million. 

The woes of China's property market dragged commodities prices lower in London trading. 

 

Asian Markets Extend Weekly Losses

In Monday's trading in Asia, the Nikkei index decreased 1.3%, the SSE Composite index declined 0.3%, the Hang Seng index decreased 1.8% and the KOSPI index decreased 0.2%. 

In the previous week, Asian markets declined except the Nikkei index in Japan but market indexes reversed today after the yen dropped below 145 against the U.S. dollar. 

The Nikkei 225 index gained 1.3% in the week and extended weekly gains to 26.2% after Japan reviewed machine tools orders, inflation and current account surplus data this week. 

The Hang Seng index in Hong Kong declined 1.7% in the week and extended this year's losses to 5.4% on the property sector woes and weak international trade and inflation data in China.