📰 What’s moving Markets?

Stocks

• The S&P 500 and the Nasdaq Composite posted second straight weekly losses on Friday, while the Dow Jones Industrial Average closed the week up 0.6%.

• Big tech names, including Tesla, Meta Platforms Inc, and Microsoft, faced declines ranging from 0.6% to 1.3%, influenced by rising US Treasury yields.

• U.S.-listed shares of Chinese giants Alibaba and JD.com declined by 3.5% and 5.3% respectively, due to Beijing's disappointing stimulus measures and slowing post-pandemic recovery.

• The semiconductor index dropped 2.3%, marked by Nvidia's 3.6% fall; the index's 5% weekly decline was its worst since early April.

• Energy and healthcare sectors in the S&P advanced; the energy sector benefited from rising crude prices and bullish news for Occidental Petroleum Corp.

Bonds

• The U.S. government reported a 0.8% climb in the producer price index (PPI) for the 12 months leading to July, a notable increase from the 0.2% rise in the previous month. This led to higher treasury yields.

• Despite expectations that the Federal Reserve would avoid tightening credit conditions, bets against a rate hike in September decreased slightly to 88.5% post-data.

• The yield on the two-year U.S. Treasury note reached 4.88%.

FX

• On Friday it was announced that the UK's economy grew 0.2% in Q2 and 0.5% in June, outperforming expectations. The pound rose 0.3% to almost $1.27 against the dollar.

Commodities

• The energy sector's 1.6% growth was bolstered by rising crude prices and tightening supply predictions from the International Energy Agency.

📊 Chart of the Day

The ISM Composite Index, which measures manufacturing and overall economic activity, often correlates negatively with the high yield bond spread. This is because when economic activity reduces, it is assumed that risky business (which issue high yield debt) might struggle to meet their obligations, so investors demand a high spread above base rate on those bonds.

Recently the ISM has been falling, but the spread on high yields bonds has not increased.

ISM Composite and High Yield Bond spread (inverse)

🤿 Deep Dive

Over the weekend, The Guardian released an article exploring whether the UK would be able to compete in the global semiconductor manufacturing index. It doesn’t seem promising…

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

• In response to global semiconductor shortages and geopolitical tensions, the UK is investing £1bn over a decade in microchip production. This pales in comparison to massive subsidies from the US and EU.

• Despite having 25 microchip factories, the UK accounts for only 0.5% of global semiconductor sales, due in part to a history of offshoring.

• With the US and China introducing investment restrictions in the semiconductor sector, the UK blocked a takeover of its largest chip factory on national security grounds.

• Notably, UK chip design giant, Arm, plans to list on the New York Stock Exchange, highlighting the sector's evolving investment landscape.

📆 Coming up this Week

Monday 14th August

• Japan GDP (YoY) consensus: 3.1%, last: 2.7%

• China Industrial Production consensus: 4.5%, last: 4.4%

• China Retail Sales consensus: 4.8%, last: 3.1%

Company earnings: Suncor, monday.com

Tuesday 15th August

• Canada Headline CPI (YoY) consensus: 2.7%, last: 2.8%

• United States Retail Sales consensus: 1.50%, last: 1.49%

• United Kingdom Unemployment Rate consensus: 4.0%, last: 4.0%

• Japan Industrial Production consensus: 2.0%, last: -2.2%

Company earnings: Home Depot, Nu, Sea

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