In the current session, September E-Mini S&P 500 futures (ESU23) have advanced by +0.24%, while Sep Nasdaq 100 E-Mini futures (NQU23) show a gain of +0.25%.
At the beginning of today’s trading, stock indexes exhibit modest upward movement. The upward trajectory in U.S. stock indexes can be attributed to the positive momentum stemming from a rally in European stocks. The Euro Stoxx 50, for instance, has surged by more than +1%, fueled by a strong performance in Italian bank stocks. This surge follows reassuring statements from the Italian government, indicating that a new bank tax will be limited to 0.1% of a bank’s assets.
Market participants are eagerly anticipating the U.S. consumer price report scheduled for release on Thursday. Forecasts point to an increase in the July Consumer Price Index (CPI) to +3.3% year-on-year (y/y), up from +3.0% y/y in June. However, the CPI excluding food and energy is predicted to ease slightly to +4.7% y/y, down from +4.8% y/y in June.
Regarding future interest rate moves, the markets are currently pricing in a 12% probability of a +25 basis point rate hike at the September 20 Federal Open Market Committee (FOMC) meeting, and a 34% likelihood of the same rate hike at the November 1 FOMC meeting.
Global bond yields display a mixed performance. The 10-year Treasury note yield has decreased by -0.4 basis points to 4.018%. Meanwhile, the 10-year German bund yield has risen by +2.5 basis points to 2.494%, and the 10-year UK gilt yield has seen a minor increase of +0.5 basis points to 4.391%.
Internationally, various stock markets are experiencing divergent movements. The Euro Stoxx 50 is up by +1.01%, while China’s Shanghai Composite Index has concluded the day with a decline of -0.49%. In Japan, the Nikkei Stock Index has closed down by -0.53%.
In the realm of the Euro Stoxx 50, today’s performance showcases a moderate gain. The rally in Italian bank stocks has not only bolstered European banks but also contributed to the overall market’s upward movement. Improved market sentiment stems from clarifications by the Italian government regarding its new tax on bank windfall profits, ensuring that the tax will be capped at 0.1% of a company’s assets. Additionally, Continental AG has surged by over +1% on the back of Q2 sales that exceeded expectations. Conversely, ABN Amro Bank NV has encountered a decline exceeding -2%, attributed to warnings of higher costs in the coming year.
China’s Shanghai Composite has retreated to a 1-1/2 week low, marking a moderate decrease in closing. The decline can be linked to deflation concerns prompted by a substantial drop in China’s July consumer prices, the most significant decrease in 2-1/2 years. Moreover, unexpected declines in producer prices have exacerbated these concerns. Despite these setbacks, a rebound in property stocks has mitigated losses. The Economic Observer has reported forthcoming discussions among local government officials from key cities to address property easing measures. Chinese property stocks have faced challenges this week, partly due to apprehensions about a potential default at Country Garden Holdings.
China’s July CPI has contracted by -0.3% y/y, marking the weakest report in 2-1/2 years, although surpassing expectations of -0.4% y/y. Meanwhile, July PPI has experienced a sharper decline of -4.4% y/y, falling below the anticipated -4.0% y/y.
The Nikkei Stock Index in Japan has concluded the day with a moderate decline. Japanese bank stocks have mirrored their U.S. counterparts, decreasing following Moody’s Investors Service’s decision to downgrade credit ratings for several small and midsize U.S. banks. Additionally, indications of potential downgrades for major banks have contributed to this trend. The market’s overall sentiment has been further burdened by disappointing quarterly earnings from Softbank Group, Kirin, Nikon, and Sysmex. On a brighter note, Japanese tourism stocks have ascended today, propelled by reports that China’s travel agencies are preparing for visa applications, speculating that the Chinese government might soon lift its ban on group tours to Japan.
Notably, Japan’s machine tool orders have registered a decline of 19.8% y/y, marking the seventh consecutive month of contraction in this indicator.
Foreign investors’ profit-taking endeavors have placed pressure on Japanese stocks, as indicated by data from Japan’s Ministry of Finance. In the week leading to July 28, foreign investors sold a net 257 billion yen ($1.8 billion) worth of Japanese shares and futures. This follows their net purchase of 9.49 trillion yen in the April-June period, which marked a record-breaking amount for a quarter.
Featured Image: Freepik @ yom98
