📰 What’s moving Markets?

Stocks

• US stocks declined: S&P 500 dropped 0.8%, Nasdaq Composite fell 1.2% due to increased borrowing costs and Federal Reserve's minutes from July.

• European stocks also saw decreases: Stoxx Europe 600 down 0.1%, FTSE 100 down 0.4%, and France's Cac 40 down 0.1%.

• Asian markets faced struggles yesterday: Hong Kong’s Hang Seng index down 1.4%, China’s CSI 300 down 0.7%, South Korea’s Kospi down 1.5%, and Japan’s Topix down 1.3%.

• China's property sector suffers amid economic challenges and a looming debt crisis.

Bonds

• Yields on long-term US Treasuries hit their highest since October: 10-year note yield rose to 4.28% and the two-year Treasury to 4.98%.

• China's economic challenges have been highlighted by several indicators, prompting the People’s Bank of China to lower lending rates and inject liquidity.

FX

• Concerns over prolonged high interest rates in the US and Europe due to sticky inflation.

• The British Pound (sterling) rose 0.3% against the dollar to $1.2735 after UK inflation data showed a decrease to 6.8% in July.

• The dollar has been strengthening, adversely impacting several currencies: Indian rupee hit a record low, Japanese yen at a 2023 low, and offshore Chinese yuan nearing its record low.

Commodities

• Brent crude fell 1.7% to $83.45 but has increased over 10% since the end of June. Oil prices reflect concerns about global inflation and economic growth.

• China's economic slowdown affecting global oil prices: Brent and WTI crude both decreased 4-5% this week.

• UK inflation rate eased in July, impacted by a drop in food and energy costs, with a noted decrease in gas and electricity prices. However, core inflation remained steady at 6.9%.

📊 Chart of the Day

Stocks in Europe are trading at an all-time discount versus US stocks. European stocks are currently 36% cheaper than US stocks on a 12m forward P/E basis.

Relative 12m forward P/E ratio for European and US stocks

🤿 Deep Dive

It’s been one year since Biden announced the Inflation Reduction Act. It included a huge investment in clean energy, which did a lot to support the EV industry, as reported here.

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

• The Inflation Reduction Act (IRA) signed by President Biden earmarks $400 billion for clean energy, fundamentally altering the U.S. electric vehicle (EV) landscape.

• Major automakers like Hyundai, BMW, and Toyota are making substantial investments in the U.S., from building gigafactories to establishing battery plants, signaling a shift toward domestic EV production.

• The IRA incentivizes EV production in North America with tax credits of up to $7,500 per vehicle, contingent on stringent sourcing and manufacturing guidelines.

• There's a noticeable uptick in EV adoption; sales have risen by 48.4% year-on-year, with nearly 300,000 new EVs sold in the recent quarter.

• Despite initial skepticism about the IRA incentives, automakers are adjusting. Tesla's Model Y, for instance, is driving a large portion of the growth in the U.S. EV market.

📆 Coming up this Week

Monday 14th August

• Japan GDP (YoY) consensus: 3.1%, last: 2.7%, actual 6.0% 

• China Industrial Production consensus: 4.5%, last: 4.4%, actual: 3.7%

• China Retail Sales consensus: 4.8%, last: 3.1%, actual: 2.5%

Company earnings (EPS): Suncor (beat), monday.com (beat)

Tuesday 15th August

• Canada Headline CPI (YoY) consensus: 3.0%, last: 2.8%, actual: 3.3%

• United States Retail Sales consensus: 1.50%, last: 1.49%, actual: 3.17%

• United Kingdom Unemployment Rate consensus: 4.0%, last: 4.0%, actual: 4.2%

• Japan Industrial Production consensus: 2.0%, last: -2.2%, actual: 2.4%

Company earnings (EPS): Home Depot (beat), Nu (miss), Sea (miss)

Wednesday 16th August

• Euro Zone GDP (YoY) consensus: 0.6%, last: 1.1%, actual: 0.6%

• Euro Zone Industrial Production consensus: -0.6%, last: 0.2%, actual: 0.5%

• Australia Unemployment Rate consensus: 3.5%, last: 3.5%

• Japan Trade Balance consensus: 24.6B, last: 43.0B

• United States Industrial Production consensus: 0.3%, last: -0.5%, actual: 1.0%

• United Kingdom Headline CPI (YoY) consensus: 6.8%, last: 7.9%, actual: 6.8%

• United Kingdom Core CPI (YoY) consensus: 7.4%, last: 6.9%, actual: 6.9%

Company earnings (EPS): Target (beat), Cisco (beat), Tencent (miss)

Thursday 17th August

• Japan National CPI (YoY) consensus: 2.5%, last: 3.3%

• United States Jobless Claims 4-Week Avg. consensus: 229.63K, last: 231.00K

• United States Philadelphia Fed Manufacturing Index consensus: -10.0, last: -13.5

Company earnings: Walmart, Applied Materials

Friday 18th August

• Euro Zone Core CPI (YoY) consensus: 5.5%, last: 5.5%

• Euro Zone Headline CPI (YoY) consensus: 5.3%, last: 5.5%

Company earnings: John Deere, XPeng