Stock Market
Ahead of Tuesday’s opening bell, the stock market is experiencing a downturn in response to additional concerning economic indicators emerging from China.
Prior to Tuesday’s trading session, futures tied to the benchmark S&P 500 index and the Dow Jones Industrial Average are both showing a decline of 0.6%.
In July, China’s economic challenges deepened, prompting its central bank to slash a key interest rate in an effort to stimulate growth. Notably, both consumer and factory activities experienced greater slowdowns than initially projected. The People’s Bank of China has reacted by lowering its interest rate for one-week loans to banks.
Stephen Innes of SPI Asset Management noted that policymakers are displaying signs of concern, stating, “Policymakers are starting to hit the panic button.”
Economic data from China revealed that the growth in retail spending during July was reduced to 2.5% compared to the same period the previous year, further declining from June’s already modest 3.1%. Furthermore, growth in factory production and investment also decelerated.
The People’s Bank of China’s decision to lower the interest rate on one-week loans to banks, from 1.9% to 1.8%, signifies an escalating official sense of urgency to reverse the economic downturn.
Additionally, Russia’s central bank took decisive action on Tuesday, increasing its main lending rate by 3.5 percentage points to 12%. This emergency move is aimed at strengthening the ruble, which has depreciated significantly due to the ongoing conflict with Ukraine. The ruble has experienced a one-third loss in value since the start of this year.
Stock market observers are also eagerly awaiting U.S. retail sales data, which will be released an hour before the opening of the markets. Analysts anticipate a 0.4% increase in spending for July, following a modest rise of 0.2% in June.
Despite persistent inflation over the past two years, American consumers have been a stabilizing force for the U.S. economy through their consistent spending habits.
This Wednesday, the Federal Reserve is set to release the minutes of its latest meeting, during which it raised the primary interest rate to its highest level in more than two decades.
Traders are predicting that the Fed will maintain current rates at its upcoming meeting next month, as suggested by data from CME Group. However, some speculators are betting on the possibility of the Fed initiating rate cuts in early 2024.
Turning to corporate developments, Home Depot’s shares have experienced minimal movement in premarket trading, despite the company surpassing Wall Street’s profit and revenue expectations. This achievement comes alongside ongoing sales decline.
Home Depot’s second-quarter revenue reached $42.92 billion, reflecting a 2% decrease compared to the same period last year. Cumulatively, sales have declined by 3.1% through the first half of this year when compared to 2022.
In premarket trading on Tuesday, U.S. Steel’s shares are down by approximately 1%, valuing at $30.70 per share. This decline follows an all-cash acquisition offer of $7.8 billion from industrial conglomerate Esmark, which surpasses an earlier $7.3 billion bid from rival Cleveland-Cliffs. Following the public announcement of Cleveland-Cliffs’ proposal on Sunday, U.S. Steel’s shares surged nearly 38% on Monday.
As of midday in Europe, the FTSE 100 in London has dropped by 1.4%, the CAC 40 in Paris has declined by 1.2%, and the DAX in Frankfurt has experienced a loss of 1%.
Across Asia, the Shanghai Composite Index has shown a marginal decrease of less than 0.1%, reaching 3,176.17. Meanwhile, the Hang Seng in Hong Kong has experienced an 0.8% decline, landing at 18,622.55.
In Tokyo, the Nikkei 225 has recorded a gain of 0.6%, reaching 32,238.89. This increase follows unexpectedly robust economic growth of 1.5% in the Japanese economy during the previous quarter, ending in June.
Several markets, including those in South Korea and India, remained closed due to holidays. Conversely, markets in New Zealand and Southeast Asia reported declines.
Energy markets are demonstrating volatility, with the benchmark U.S. crude losing 89 cents in electronic trading on the New York Mercantile Exchange, reaching $81.62 per barrel. This follows a decline of 68 cents on Monday, when the contract settled at $82.51. In London, Brent crude, the international oil trading benchmark, is retreating by 74 cents to $85.47 per barrel, after shedding 60 cents in the previous session to reach $86.21.
The dollar has witnessed upward movement, rising to 145.57 yen from Monday’s value of 145.52 yen. The euro is also on an upward trajectory, gaining ground from $1.0904 to $1.0934.
In trading on the previous day, the S&P 500 recorded a gain of 0.6%, the Dow saw a slight increase of 0.1%, and the Nasdaq composite experienced growth of 1.1%.
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