💸 TL;DR

Risk-on. Stocks rise, bond yields and the Dollar edge lower as investors hope that US CPI data tomorrow will provide some respite to ongoing inflation concerns in the US. Meanwhile, China is facing the opposite problem with decreasing prices hinting at a slowing economy.

📰 What’s moving markets?

• Yesterday China reported that the producer price index (PPI) dropped 5.4% year-on-year (YoY) in June, which is the fastest drop measured in over 7.5 years. CPI was flat at 0% YoY highlighting concerns over China’s ability to revive demand and jump-start economic growth.

• Despite the concerning macroeconomic picture, Chinese equities recorded small gains yesterday as investors hold out hope for monetary intervention. Stocks also benefitted from the news that US Treasury Secretary Janet Yellen’s trip to Beijing has marked a “step forward” in China-US trade relations.

• Alibaba was one of the stocks up (+3.2%) yesterday as China’s $984 million fine against Ant Group was perceived as an indication that the stringent regulatory actions against the nation's technology industry might be coming to an end.

• Gains continue today with Alibaba up 2.36%. More broadly, the Hang Seng Index is up 1.35% today after the government announced it would extend financial policies to support the real estate market until the end of 2024.

•  US Stocks traded lower throughout the day yesterday but ended in the green as several Fed members provided dovish commentary suggesting the hiking cycle might be coming to an end soon.

• This weakened the Dollar, which fell to 101.75 against a basket of currencies. Bitcoin has rallied on the risk-on sentiment, up to 13,500 against the dollar.

• Oil prices are up c. 0.60% as severe storms and excessive rainfall in the US Northeast may impact oil production and distribution, leading to higher prices.

📊 Chart of the day

IT now makes up 30% of the total US market cap. In related news, Nasdaq announced they would be reweighting the Nasdaq 100 index due to the dominance of the “magnificent 7” (Apple, Microsoft, Alphabet, Amazon, Meta Platforms Nvidia, and Tesla)

US IT Market Cap (% Total US Market Cap)

📅 Coming up this week

Monday 10th July

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Tuesday 11th July

• UK Average Earnings (including bonuses) expected: 6.80%, last: 6.40%

• UK Unemployment Rate expected: 3.80%, last: 3.80%

• Germany Headline CPI (YoY) expected: 6.40%, last 6.10%

• Japan PPI Inflation (YoY) expected: 4.30%, last 5.10%

Wednesday 12th July

• US Headline CPI (YoY) expected: 3.10%, last: 4.00%

• US Core CPI (YoY) expected: 5.00%, last: 5.30%

• Bank of Canada Interest Rate Decision expected: 5.00%, last: 4.75%

Thursday 13th July

• UK GDP (MoM) expected: -0.40%, last: 0.20%

• France Headline CPI (YoY) expected: 4.50%, last 5.10%

• US PPI Inflation (YoY) expected: 0.40%, last 1.10%

• US Initial Jobless Claims expected: 249k, last 248k

• South Africa Gold Production (YoY) expected: -1.10%, last 27.40%

• South Africa Mining Production (YoY) expected: 3.30%, last 2.30%

• Delta Air Lines Q2 Earnings expected EPS: $2.42

• Pepsico Q2 Earnings expected EPS: $1.95

Friday 14th July

• JP Morgan Q2 Earnings expected EPS: $3.66

• Citi Q2 Earnings expected EPS: $1.45

• United Healthcare Q2 Earnings expected EPS: $2.10

• Wells Fargo Q2 Earnings expected EPS: $1.16

• State Street Q2 Earnings expected EPS: $2.10

📈 The markets at a glance