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- Stocks fall over economic concerns surrounding China and inflationary pressures in the West
Stocks fall over economic concerns surrounding China and inflationary pressures in the West
🐮🐻 #48: UK inflation prints as expected at 6.8% YoY (headline CPI); UK and US government bonds rise
TL;DR: Concerns about China's economy, underscored by shadow bank Zhongrong's liquidity issues and a decline in home prices, coupled with strong U.S. retail sales data, are stoking fears of prolonged high interest rates, leading to a decline in global stock markets. Meanwhile, the UK faces inflationary pressures with record wage growth, and potential rate hikes loom in both the UK and the EU.
📰 What’s moving Markets?
Stocks:
China's Zhongrong shadow bank's payment defaults emphasize ongoing property sector issues; home prices fell for a second consecutive month.
Australia and South Korea led Asian stocks' downward trend; MSCI China index set to lose recent gains.
Wall Street's S&P 500 and Nasdaq Composite dropped by 1.2% and 1.1% respectively, reaching their lowest levels since mid-July.
European stocks also declined, with Stoxx Europe 600 and Cac 40 in Paris decreasing, and FTSE 100 leading the drop by 1.6%.
Intel might cancel its $5.4 billion acquisition of Tower Semiconductor due to regulatory hurdles.
VinFast's US debut led to a 255% surge, surpassing GM and Ford's market caps.
Bonds:
UK inflation has printed at 6.8% YoY (headline CPI), down from 7.9% YoY increase last month and in line with expectations. CPI core was 6.9%, slightly higher than expectations of 6.8%.
Concerns that US interest rates might stay high longer, led the 10-year US Treasury yield to rise to 4.22%.
UK's wage growth contributes to rising yields on two-year gilts, reaching 5.10%.
Norway's sovereign fund reported a 10% return in H1; equities increased by 14% while real estate dropped by 4.6%.
FX/Crypto:
The RBNZ kept rates unchanged at 5.5%, hinting at potential future hikes due to inflation.
Chinese renminbi dropped 0.3% against the dollar after the People's Bank of China lowered its lending rate.
Bitcoin volatility is at its lowest since 2016.
Sterling rose by 0.2% against the dollar to $1.27.
Commodities:
Brent oil prices declined. U.S. crude decreased 0.31% to $80.74 a barrel, while Brent slipped 0.26% to $84.67 a barrel.
Spot gold remained stable at around $1,901.8 an ounce.
🐮 ~ 🐻
📊 Chart of the Day
There is an uncanny resemblance between US inflation between 1966 and 1982 and current inflation since 2013. It’s probably nothing…
US CPI YoY (1966-1982 and 2013-current)
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🤿 Deep Dive
The FTSE 100 dropped 1.6% yesterday as UK wage growth came in higher than expected, fueling inflation concerns.
If you’re pressed for time, here’s the TL;DR:
UK wages saw a record annual growth of 7.8% (excluding bonuses) in the three months to June.
This wage growth exceeded analysts' expectations, potentially pressuring the Bank of England's Monetary Policy Committee on inflation concerns.
Market predictions for a 0.25% interest rate rise in September surged to 99% following these figures.
Despite wage growth, the labour market showed signs of loosening, with an unexpected rise in unemployment.
Critics emphasize challenges for working people, with concerns over long-term sickness and employment rates for over-50s.
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📆 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%
Euro Zone Industrial Production consensus: -0.6%, last: 0.2%
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%
United Kingdom Headline CPI (YoY) consensus: 6.8%, last: 7.9%
United Kingdom Core CPI (YoY) consensus: 7.4%, last: 6.9%
Company earnings: Target, Cisco, Tencent
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
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