📰 What’s moving Markets?

Stocks:

• Asian shares mixed today: Japan's stocks trended upwards while mainland China and Hong Kong trended downwards. European futures are flat and US futures are slightly lower to start the week.

• Losses in China were largely driven by the central bank cutting rates less than expected. Markets expected a 15 bps rate cut; however, China’s central bank only cut the one-year lending rate by 10 basis points and left its five-year rate unmoved. Hong Kong’s Hang Seng index is down 1.8% while mainland China’s CSI 300 is down 0.9% today.

• Global stocks experienced the largest weekly decline since March last week, influenced by the US economy's potential to maintain high interest rates and China's continued recovery concerns post-pandemic.

• Wall Street's S&P 500 dropped 2.1% for the week, and the tech-focused Nasdaq Composite dropped 2.6% over five sessions.

• Major US tech stocks (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, Tesla) saw a combined value drop of over $900 billion over three weeks.

Bonds:

• US Treasury yields approached their highest levels since 2007, reaching 4.25% on Friday.

• UK's 10-year gilt yields declined by 0.07 percentage points to 4.67%. Europe's benchmark, the 10-year German Bund, decreased by 0.09 percentage points to 2.62%.

FX:

• The yuan weakened, even though the People's Bank of China (PBOC) set the currency at a stronger-than-expected level.

• Renminbi traded at Rmb7.2812 against the dollar, close to its weakest level since November. PBOC set its midpoint at Rmb7.2006 to the dollar, above market expectations.

• The US dollar has been on the rise, reaching a nine-month peak against the Japanese yen.

Commodities:

• Oil prices showed a slight increase after a seven-week winning streak was broken due to concerns about Chinese demand. Brent stood at $85.32 a barrel, and US crude rebounded to $81.87 per barrel

• Gold's value declined to $1,891 an ounce, a five-month low, pressured by the rising US dollar and bond yields.

📊 Chart of the Day

Supply chains are mostly back to normal as measured by container freight rates; however, there has been a slight increase in freight rates from China to US in recent days.

Price rate for container freights

🤿 Deep Dive

Not all analysts have a negative view of market sentiment; one analyst expects the S&P 500 to end the year 10% higher.

If you’re pressed for time, here’s the TL;DR:

• The August market downturn presents an ideal chance to invest in stocks before they rally again, as stated by Fundstrat's Tom Lee.

• The S&P 500's recent 5% decline was influenced by China's weakening economy and the US's unexpected economic growth, causing bond yields to rise.

• Rising interest rates and a robust US economy, signalling more potential hikes, are now primary concerns for investors.

• Central banks have increased interest rates by 525 basis-points; the market anticipates a 33% likelihood of another 25 basis-point rise soon.

• Despite August's typical stock market struggles, Lee remains bullish, predicting the S&P 500 will climb 10% by year-end.

📆 Coming up this Week

Monday 21st August

• German PPI (YoY) consensus: 7.6%, last: 0.1%

Company earnings: Zoom

Tuesday 22nd August

• Japan BoJ Core CPI (YoY) consensus: 2.7%, last: 3.0%

• Australia Judo Bank Australia Manufacturing PMI consensus: 49.6, last: 49.6

• Japan au Jibun Bank Japan Manufacturing PMI consensus: 49.5, last: 49.6

Company earnings: Lowe’s, Urban Outfitters

Wednesday 23rd August

• France Manufacturing PMI consensus: 45.2%, last: 45.1

• Germany Manufacturing PMI consensus: 38.6%, last: 38.8

• Eurozone Manufacturing PMI consensus: 42.4%, last: 42.7

• Canada Retail Sales (MoM) consensus: 0.0%, last: 0.2%

• United States S&P Global US Manufacturing PMI consensus: 49.4%, last: 49.0

• Euro Zone Consumer Confidence consensus: -14.0%, last: -15.1

Company earnings: Lowe’s, Urban Outfitters, Baidu

Thursday 24th August

• United Kingdom GfK Consumer Confidence consensus: -29, last: -30

• Japan Tokyo Core CPI (YoY) consensus: 2.9%, last: 3.0%

• Japan Tokyo CPI (YoY) consensus: 3.0%, last: 3.2%

Company earnings: Nvidia, Analog Devices

Friday 25th August

• German GDP (YoY) consensus: -0.2%, last: -0.2%