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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)

🐮 ~ 🐻 

🤿 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.

🐮 ~ 🐻 

📆 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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