In the current market scenario, September E-Mini S&P 500 futures (ESU23) are experiencing a decline of -0.18%, while Sep Nasdaq 100 E-Mini futures (NQU23) are down -0.32%.
The stock indexes are showing moderate losses this morning, primarily driven by a retreat in technology stocks following disappointing earnings reports from both Microsoft (NASDAQ:MSFT) and Texas Instruments (NASDAQ:TNX). Moreover, there is some long liquidation and position-squaring taking place in the stock market, likely in anticipation of an expected 25 basis point rate hike by the Federal Reserve later today. However, the losses were somewhat offset by Alphabet’s (NASDAQ:GOOGL) pre-market surge of more than +6% after reporting better-than-expected s2 revenue.
Q2 corporate earnings season has started off on a strong note, with nearly 80% of U.S. companies reporting results that have surpassed profit estimates.
Market participants are eagerly waiting for decisions from both the Federal Reserve and the European Central Bank. The expectation is that both central banks will raise their respective interest rates by 25 basis points, and investors are looking for guidance regarding the possibility of further rate hikes.
The markets have already priced in a 97% probability of a +25 basis point rate hike at the upcoming FOMC meeting. Furthermore, the markets anticipate a peak funds rate of 5.42% by November, which would be +34 basis points higher than the current effective federal funds rate of 5.08%.
As for global bond yields, they are showing mixed trends. The 10-year T-note yield has decreased by -0.8 basis points to 3.877%, while the 10-year German bund yield has risen by +2.1 basis points to 2.447%. On the other hand, the 10-year UK Gilt yield is down by -0.6 basis points at 4.261%.
Overseas stock markets are also experiencing declines. The Euro Stoxx 50 is down by -1.48%, China’s Shanghai Composite Index has closed moderately lower by -0.26%, and Japan’s Nikkei Stock Index has ended slightly lower by -0.04%.
The Euro Stoxx 50 has reached a 2-week low and is showing moderate losses, primarily influenced by weak corporate quarterly earnings results. Notably, luxury goods makers are facing pressure, with LVMH experiencing a -4% drop in its stock value after reporting first-half profit figures weaker than expectations due to a decline in U.S. sales. Additionally, mining stocks are also underperforming, led by a -1% decrease in Rio Tinto Group’s stock value after reporting a decline in first-half profit and cutting its dividend due to China’s economic slowdown affecting earnings. Despite these negative trends, Rolls-Royce Holdings has surged more than +20% after raising its full-year guidance and revealing better-than-expected financial results for the first half of the year.
Eurozone Jun M3 money supply has risen by +0.6% year-on-year, falling short of the expected +0.9% y/y growth and representing the slowest increase in nearly 13 years.
In China’s Shanghai Composite, there is a moderate decline as investors wait for signs of the government’s commitment to supporting the economy. Stocks have given back some of Tuesday’s gains due to long liquidation, as Chinese policymakers have not met the market’s expectations for stronger economic stimulus. The market experienced a boost on Tuesday following the politburo meeting, which adopted a pre-growth stance that was more dovish than anticipated. Today, weakness in automakers has led to an overall market decline after the China Passenger Car Association projected a -4.8% year-on-year drop in retail passenger vehicle sales for July. However, losses have been limited as property stocks rose for a second day after the politburo indicated plans to implement measures to revive the sector.
Japan’s Nikkei Stock Index has closed with slight losses, with investors exercising caution ahead of the Federal Reserve’s policy decision and the upcoming BOJ meeting. Profit-taking and long liquidation are also contributing factors, along with upcoming Japanese corporate earnings announcements. Additionally, the strength of the yen is impacting exporters’ earnings prospects and exerting pressure on exporter stocks. Despite these headwinds, the overall market losses have been limited due to signs of easing price pressures after Japan’s service prices for businesses showed a slowdown in June, marking the most significant decline in 15 months.
Japan’s May leading index CI has been revised lower to 109.2 from the initial report of 109.5, and the June PPI services prices eased to +1.2% year-on-year from +1.7% y/y in May, surpassing expectations of +1.5% y/y and representing the slowest pace of increase in 15 months.
Featured Image: Freepik @ nicedream30
