IG Morning Call

[KoketsoIG]

The Nikkei 225 and Hang Seng both fell sharply overnight, with the latter awaiting news from the Communist Party's Third Plenum meeting. There has been only limited impact from the assassination attempt on Donald Trump, though fresh polling on the presidential race is expected, which may provide a clearer indication of the impact of the event on the race for the White House. Fed chairman Jerome Powell will speak this afternoon, and markets will pay close attention following last week's softer CPI print and rising expectations that September will see a Fed rate cut. The Dow succeeded in closing at 40,000 on Friday, and US futures point to a stronger open, though European markets are expected to begin the week on the back foot.

[KoketsoIG]

While the Nikkei 225 managed to edge higher overnight, the Hang Seng continued its losing streak, dropping 1.4% even as the latest Communist Party plenum got underway. US markets made gains on Monday, as Fed chairman Jerome Powell reinforced hopes of a September rate cut. Powell commented that recent inflation data have been moving in the right direction. A September rate cut is now priced in, according to the CME Fed Watch tool. European markets remain under pressure, with the FTSE 100 falling yesterday on poor Chinese data and worries about the outlook for retail stocks. On today's agenda is the German ZEW report, plus US retail sales and earnings from Bank of America.

 

[AshishIG]

Asian chipmaking stocks declined on Wednesday as investors engaged in profit-taking and exercised caution ahead of earnings reports from industry leaders ASML and TSMC. ASML, the Dutch lithographic equipment maker, reported strong Q2 bookings driven by AI industry demand, setting a positive tone for the sector. TSMC, slated to report on Thursday, is expected to show robust earnings following high Q2 revenue. Despite these positive indicators, chipmaking stocks across Japan, China, and South Korea fell as the market awaited further details on AI-related chip demand. The sector's retreat was partly attributed to profit-taking after recent AI-driven valuation surges. Adding to market concerns were comments from Republican presidential candidate Donald Trump about Taiwan paying for US defense supplies, highlighting geopolitical risks for the industry. The Dow surged to a new high yesterday, closing in on 41,000, following strong earnings from UnitedHealth. In the UK inflation slowed to 0.1% in June from 0.3% a month earlier, though the annual figure held at 2%. 

[AshishIG]

hip stocks in Asia dropped sharply following a selloff on Wall Street due to reports of potential tighter US export restrictions on advanced semiconductor technology to China. TSMC, the world's largest contract chipmaker, lost about $61.35 billion in market value over two days. Other major Asian chipmakers like Samsung, SK Hynix, and Tokyo Electron also saw significant declines. The US is considering using the foreign direct product rule to restrict sales of products made using American technology. This move could affect companies like Tokyo Electron and ASML, which have significant sales to China. The proposed restrictions are part of the US strategy to protect its semiconductor industry and compete with China. The news has accelerated a shift from Big Tech stocks to smaller value stocks among investors. UK employment data showed that the unemployment rate held at 4.4%, while wages grew at 5.7%, in line with forecasts. The ECB announces its latest decision on interest rates, and is expected to leave borrowing costs unchanged. Netflix becomes the first of the closely-watched big tech stocks to report, as earnings season moves into high gear.

[KoketsoIG]

Asian stock markets declined despite China's surprise rate cut, with investors viewing it as a sign of economic weakness. President Biden has reportedly decided to drop out of the election race and endorse Vice President Kamala Harris for the Democratic ticket, potentially upending the presidential race. US stock futures showed slight gains following the Biden news, while European futures also edged up, after a week of heavy losses for tech stocks. A busy week of corporate earnings is ahead, with major tech companies like Tesla and Alphabet reporting. Key economic data coming this week includes the Fed's preferred inflation measure and Q2 GDP figures, and markets are anticipating a benign inflation outcome, which could strengthen the case for a September rate cut.

[AshishIG]

Semiconductor shares rebounded in Asia overnight but weaker commodity prices cast a gloom over the session. Disappointment over the lack of any major growth initiatives at China's recent Plenum have left indices there rudderless, while a strengthening yen has hobbled the Nikkei 225's rebound. Attention now turns to earnings from Tesla and Alphabet, following on from Netflix last week. These two member of the 'Magnificent 7' will set the tone for the rest of the week. Kamala Harris has achieved enough support to be the Democrat nominee, while raising a record $81 million in donations in 24 hours. Markets continue to await fresh polling on a contest between Donald Trump and the incumbent vice-president. 

[AshishIG]

Asian stocks declined following disappointing earnings from Tesla and Alphabet, impacting risk appetite. The yen strengthened to a seven-week high ahead of the Bank of Japan meeting next week, where a rate hike remains a possibility. US stock futures fell, with Nasdaq futures down 1% and S&P 500 futures down 0.6%. Markets are pricing in 62 basis points of Fed easing this year, with a 95% chance of a cut in September. The Japanese yen surged against major currencies, reaching a seven-week high against the dollar. European markets are expected to open lower, with luxury stocks in focus following LVMH's report of slowing sales growth.

[AshishIG]

Asian shares dropped sharply overnight, influenced by a slump in global tech stocks. Chinese stocks, iron ore, and oil prices fell further after China's central bank unexpectedly cut longer-term interest rates. European markets were set for a lower open, following heavy losses on Wall Street. On Wall Street, the Nasdaq experienced its worst one-day fall since 2022, dropping almost 4% due to disappointing earnings from Alphabet and Tesla, while the S&P 500 finally snapped its streak without a 2% drop, having gone for 356 days without such a one-day fall. Investors sought safety in cash and short-term debt, with US two-year yields hitting their lowest in almost six months. The Japanese yen strengthened as a safe-haven currency, reaching its strongest level in 2.5 months. Today's data barrage from the US includes initial jobless claims, durable goods orders and the first GDP reading for Q2. US futures are slightly higher after yesterday's steep losses.

[AshishIG]

Markets are calmer at the end of a turbulent week, with European and US stock futures generally higher on Friday. Asian markets were mixed, with Taiwan experiencing a significant drop. Currency markets have stabilised, with the yen settling around 154 per dollar after recent volatility. Investors are adjusting positions due to weak US economic data, global equity sell-offs, and speculation about a potential Bank of Japan rate hike. The dollar gained some support from better-than-expected US GDP growth, though accompanying price data was not as weak as hoped. The focus now turns to today's US PCE price index release. Other events to watch include earnings reports from major companies like 3M, Bristol Myers Squibb, and Colgate Palmolive.

[AshishIG]

Risk appetite rebounded at the end of last week, but markets face a major test over the coming days thanks to the volume and the importance of the news releases. Big Tech earnings will dominate on the corporate side of things, including Microsoft, Apple and Amazon, providing crucial insight into these drivers of the rally over the past 18 months. Meanwhile, three big central banks will issue their latest decisions. The BoJ, Fed and BoE are all not expected to move this week, but cuts from the latter two are widely-expected for September and August respectively. The week begins quietly, though geopolitical tensions fill the gap left by an empty calendar, following the attacks over the weekend and more tensions between Israel and Hezbollah that threaten to widen the ongoing Gaza conflict.

[AshishIG]

Investors are preparing themselves for a busy few days in global markets, though risk appetite has continued to recover from recent volatility. Microsoft numbers tonight kick off earnings from the tech heavyweights this week, while the central bank decisions remain firmly in focus. Oil prices have hit fresh seven-week lows on demand concerns. Eurozone economic data will fill up the session as investors await Microsoft's numbers. Indices have clawed their way higher from last week's lows, though the gains could easily slip away if Big Tech earnings are disappointing

[AshishIG]

The Bank of Japan caught markets on the hop with a sharp rise in rates to 0.25%, though it opted to cut its monthly bond buying programme by a smaller amount. Asian markets rallied sharply, with the Nikkei 225 up 0.8% but Chinese markets made even more solid gains. The dollar managed to rally against the yen, though today’s Federal Reserve decision may well limit any short-term upside. Microsoft’s earnings beat expectations, but weaker growth in cloud computing disappointed investors. However, solid numbers from AMD and Samsung helped to steady the ship, ahead of Meta earnings tonight. It promises to be a busy day on the economic front, thanks to more eurozone data and the monthly US ADP jobs report. 

[AshishIG]

After the Bank of Japan's hike and the Fed's hold, today attention turns to the Bank of England, which could be on the cusp of announcing its first rate cut for the UK economy since 2020. The decision is very finely-balanced, and the bank may yet point to strength in services inflation as a reason to hold back this time. Tech stocks rallied overnight, with Nvidia surging 13% and the Nasdaq 100 gaining over 3%, while the Fed has essentially put markets on notice for a September rate cut. In his press conference, chairman Jerome Powell shrugged aside suggestions that a September move would be viewed politically, noting that the US central bank remains independent. Also on the calendar for today are weekly jobless claims, but the focus after the BoE will be earnings from Amazon and Apple. 

[AshishIG]

Equity markets around the globe are in full retreat after a torrid session on Thursday. US stocks slumped, led by the tech sector, after very poor earnings from Intel and a weak forecast from Amazon. Signs of weakness in the US economy were seen in a disappointing ISM manufacturing PMI, where the employment sub-index was particularly weak. Japanese stocks drove the decline in Asia, as the Nikkei 225 fell over 5%. A strengthening yen has added to the intensity of the losses. Investors are also worried about a possible widening of the conflict in the Middle East, as the US and Israel brace for an Iranian response to an assassination on their territory this week. Today's payrolls reading has grown in importance; a weaker figure will likely result in further worries about the US economy, and result in suggestions that the Fed has waited too long to cut rates. 

[AshishIG]

The new week has begun with markets in turmoil. Volatility has surged to a two-year high, while the Nikkei 225 has suffered its largest one-day drop since 1987, wiping out all the gains made this year. US futures point to another wave of selling, with the Nasdaq 100 currently expected to open almost 1000 points lower from Friday's close. After Friday's payroll reading worries about a US recession are running high, and investors fear that the Fed is dangerously behind the curve, having held policy unchanged last week. To add to this, the world is expecting a significant attack on Israel by Iran, which according to President Biden could come as early as today