Tech strength drives stocks through H1 expectations

TL;DR: US equities have surpassed expectations in the first half of the year driven by tech strength, with concerns into H2 including recession risks and downward earnings revisions. Employment data in focus this week.

📰 What’s moving markets?

• S&P 500 is up 16.4% YTD closing Friday at 4,450.58 having already exceeded its average year-end price target for 2023. This is surpassed by Japan’s Nikkei 225 closing H1 up 29%, and the NASDAQ 100 up 31.7% which records its best start to the year in the last 4 decades, advancing 1.5% on Friday due to tech sector gains.

• Nvidia jumped 3.6% to record H1 returns of 189%, and Apple gained 2.3% to close around $3tn market cap.

• Nike fell 2.7% on Friday after reporting lower-than-expected profits.

• In Australia this week, we could see the RBA hold rates to assess their position especially given a recent undershoot in inflation, but a hike still remains on the cards.

• US real rates are approaching recent highs with 5y close to 2%, as Core PCE inflation came in cooler than expected at 4.6% YoY.

📊 Chart of the day

Seasonal patterns in implied volatility suggest VIX could go even lower, as the low point of the calendar year is typically in July.

VIX could go even lower in July

📅 Coming up this week

Monday 3rd July

• China Manufacturing PMI expected: 50.2, last: 50.9

• Germany Manufacturing PMI expected: 41.0, last: 41.0

• UK Manufacturing PMI expected: 46.2, last: 46.2

• US Manufacturing PMI expected: 47.2, last: 46.9

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