📰 What’s moving Markets?

Stocks:

• Asian shares defensive after China's deflationary data. China reported headline CPI fell 0.3% YoY, below analyst expectations of a 0.5% drop. Producer prices also fell with PPI dropping by 5.4% YoY, which was greater than analyst expectations of -4.0% drop. The Hang Seng Index, Nikkei 225 and Nifty 50 index are all down around 0.40% today.

• European futures rise: EUROSTOXX 50 futures up 0.9%, FTSE futures gain 0.5%, after Italy's clarified its announcement regarding bank tax limits (more in the Deep Dive section of this newsletter).

• Wall Street had a broad sell-off: Dow fell 0.5%, S&P 500 down 0.4%, and Nasdaq declined 0.8% after Moody's downgraded several US banks.

Bonds:

• US longer-term Treasury yields decrease further in Asia; 10-year yields fall to as low as 3.9840%.

• The rates-sensitive two-year yield dropped slightly, with economists expecting US headline inflation to rise to 3.3% annually.

FX/Crypto:

• China's yuan stabilizes at 7.2084 per dollar after state banks intervene.

• US dollar retreats to 102.39 against a basket of currencies after recent gains; Australian dollar rebounds to $0.6553.

Commodities:

• Oil prices decline slightly: Brent crude down 0.2% to $86.00 per barrel, U.S. West Texas Intermediate also drops 0.2% to $82.73.

• Gold price rises by 0.3% to $1,930.18 per ounce.

📊 Chart of the Day

85% of the S&P 500 have reported earnings with 78% beating analyst estimates. However, no matter whether stocks miss, in line or beat earnings, they report a decline in share price.

Damned if you do, damned if you don’t.

Average stock performance post 2Q2023 earnings report (S&P 500)

🤿 Deep Dive

UPDATE: since this article and summary was was written yesterday the Italian government has now clarified that the windfall tax will not exceed 0.1% of bank assets.

You might have heard that the Italian government hit banks with a surprise windfall tax yesterday. In short, the banks were earning too much money from rising interest rates and not passing this to customers, so the government stepped in. Pretty bold move.

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

• Italy's announced a 40% tax on banks' added profits from rising interest rates.

• Major banks, like Intesa Sanpaolo, saw shares plummet by 8.6%.

• Analysts project the tax could yield over €4.5bn for the government.

• The intention is to support families and small businesses with this revenue.

• Notably, banks haven't fully passed on European Central Bank's rate hikes to savers.

• Smaller banks face more significant challenges with the tax.

• Many voices have criticized the government's announcement strategy.

• Context: Italy's top banks reported a 64% profit rise this year, but the broader economy shows signs of strain.

📆 Coming up this Week

Monday 7th August

• Germany Industrial Production MoM consensus: -0.4%, last: -0.2%, actual: -1.5%

• China Trade Balance consensus: 625.25M, last: 491.25M, actual: 575.5M

Company Earnings: Paramount (beat), Palantir (in line), Lucid (miss), KKR (beat)

Tuesday 8th August

• Germany Headline CPI YoY consensus: 6.2%, last: 6.4%, actual: 6.2%

• France Trade Balance consensus: -8.0B, last: -8.4B, actual: -6.7B

• United States Trade Balance consensus: -65.70B, last: -69.00B, actual: -65.50B

Company Earnings: UPS (beat), AMC (beat), Lyft (beat), Fox (beat), Coupang (beat), Twilio (beat)

Wednesday 9th August

• China Headline CPI YoY consensus: -0.5%, last: 0.0%, actual: -0.3%

• China PPI YoY consensus: -4.0%, last: -5.4%, actual: -5.4%

Company Earnings: Roblox, Disney, Sony, E.On

Thursday 10th August

• Japan PPI YoY consensus: 3.5%, last: 4.1%

• United States Initial Jobless Claims consensus: 231K, last: 227K

• United States Headline CPI YoY consensus: 3.3%, last: 3.0%

• United States Core CPI YoY consensus: 4.7%, last: 4.8%

Company Earnings: Alibaba

Friday 11th August

• United Kingdom GDP QoQ consensus: 0.0%, last: 0.1%

• United Kingdom GDP YoY consensus: 0.2%, last: 0.2%

• United Kingdom Industrial Production YoY consensus: -2.1%, last: -2.3%

• United Kingdom Manufacturing Production consensus: -1.0%, last: -1.2%

• France Headline CPI YoY consensus: 4.3%, last: 4.5%

• United States Core PPI YoY consensus: 2.3%, last: 2.4%

• United States PPI YoY consensus: 0.7%, last: 0.1%