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Stocks are subdued ahead of US Independence Day, but Oil rallies amid production cuts
🐮🐻 #17: PMI, AstraZeneca, Tesla, Nio, Li Auto, Dollar Index
TL;DR: Asia markets have a subdued start to the day (except the Nikkei 225 which is down 1% after profit-taking from a very strong first half of the year) ahead of US Independence Day during which the Nasdaq, S&P, and US bond markets are closed.
📰 What’s moving markets?
Hong Kong 50 was up 1.3% yesterday after China’s manufacturing index (PMI) came in slightly higher than expected at 50.5 (expectations: 50.2), which was down from last month (50.9) but crucially above the 50 mark which indicates that the manufacturing industry is still growing. Germany, the UK, and the US reported PMI <50 yesterday.
What is PMI?
“The Purchasing Managers’ Index (PMI) is an index of the prevailing direction of economic trends in the manufacturing service sectors. It consists of a diffusion index that summarises whether market conditions are expanding, staying the same, or contracting as viewed by purchasing managers. The purpose of the PMI is to provide information about current and future business conditions to company decision-makers, analysts, and investors.”
AstraZeneca slipped 6% yesterday on disappointing results from a phase 3 lung cancer trial.
Tesla rallied 6.5% due to record deliveries which proved the effectiveness of their recent price cut strategy. Tesla’s rally contributed to an overall boost in the EV sector, with China EV stocks such as Nio and Li Auto up 3.5% and 3.4% respectively (at yesterday’s close).
Markets are nearly pricing a 90% probability for the Fed to hike US interest rates by 0.25% at the July meeting.
Saudi Arabia and Russia have extended oil production cuts, which pushed the price of oil up 1% yesterday and a further 1.5% in this morning’s trading.
The dollar index has increased slightly over the past couple to 103.
📊 Chart of the day
The market rally year-to-date has been driven primarily by tech stocks, specifically the 7 mega-caps: MSFT, NVDA, META, AMZN, GOOGL, AAPL, and TSLA.
Sector performance of the S&P 500
Mega cap tech performance vs S&P 500 ex-mega cap tech
Source: Coatue opinion and analysis using Bloomberg data as of June 23.
📅 Coming up this week
Monday 3rd July
China Manufacturing PMI expected: 50.2, last: 50.9, actual: 50.5
Germany Manufacturing PMI expected: 41.0, last: 41.0, actual: 40.6
UK Manufacturing PMI expected: 46.2, last: 46.2, actual: 46.5
US Manufacturing PMI expected: 47.2, last: 46.9, actual: 46.0
Tuesday 4th July
Reserve Bank of Australia Base Rate Decision expected: 4.35%, last: 4.10%
Wednesday 5th July
Euro Zone PPI (YoY) expected: -1.4%, last: 1.0%
Thursday 6th July
Euro Zone Retail Sales (MoM) expected: 0.2%, last: 0.0%
US ADP Employment Change expected: 240k, last: 278k
US JOLTS Job Openings expected: 9968k, last 10103k
Friday 7th July
US Change in Nonfarm Payrolls expected: 225k, last: 339k
US Unemployment Rate expected: 3.6%, last: 3.7%
US Average Hourly Earnings (MoM) expected: 0.3%, last: 0.3%
US Labor Force Participation Rate expected: 62.6%, last: 62.6%
📈 The markets at a glance
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