Stocks
The performance of the S&P 500 Index for today was +0.04%, the Dow Jones Industrials Index for today’s performance was +0.21%, and the Nasdaq 100 Index for today’s performance was +0.11%.
The stock market is showing a slight improvement this morning. Today’s rally in stocks is being helped along by falling inflation predictions and lower yields on U.S. Treasury notes. The 10-year US breakeven inflation rate reached a three and a half week low of 2.308% today after falling to a new low for the day. When the minutes from the FOMC meeting that took place on July 25-26 are finally made public this afternoon, the financial markets will be seeking clues as to the direction that the Fed will take with its monetary policy going forward. The economic numbers released this morning from the United States were mixed, with housing starts and manufacturing production both increasing by a greater amount than anticipated in July, but construction permits falling short of expectations during the same month.
The continued economic challenges in China are acting as a drag on markets around the world. As a result of China’s July home sales dropping by the biggest amount in seven months for the second month in a row, the yuan plunged to a level not seen in 9 and a half months today, while the Shanghai Composite dropped by 0.82 percent. In addition, since Zhongrong International Trust was unable to make payments on dozens of investment products, there has been an increase in the level of anxiety regarding the liquidity of China’s shadow banking sector.
JPMorgan Chase has revised its GDP prediction for China to 4.8% for the year 2023, down from 6.4% in May. The prior estimate of 4.9% for China’s GDP in 2023 has been revised down to 4.5% by Barclays.
Zhongrong International Trust, China’s ninth-largest trust with assets of around 600 billion yuan, was unable to make payments on thirty different investment products and froze redemptions on many different short-term instruments. Because the bulk of the underlying assets are long-term and illiquid, the company claims that cash has dried up “unexpectedly,” making it difficult to meet short-term loan commitments. This is because the majority of the underlying assets are investments. This year, the business anticipates the launch of 270 high-yielding items with a combined value of 39.5 billion yuan, which is equivalent to $5.4 billion.
According to information provided by the Mortgage Bankers Association, the number of mortgage applications dropped by 0.8% week over week. This marks the sixth week in a row in which the number of applications has decreased. The interest rate for a mortgage with a term of thirty years in the United States reached 7.16 percent last week, marking the highest level seen since the year 2001.
The number of housing starts in the United States for the month of July was 1.452 million, which was 3.9% higher month on month than the 1.450 million that was expected. Despite this, the number of building permits issued in July increased by +0.1% month-over-month to 1.442 million, which was lower than the projection of 1.463 million.
The United States’ manufacturing production climbed by 0.5% month on month in July, beating forecasts of a stagnant rate of rise by this metric.
The financial markets are pricing in a rate hike of +25 basis points at the FOMC meeting on September 20 at a probability of 11%, and they are pricing in a rate hike of +25 basis points at the FOMC meeting on November 1 at a probability of 38%.
Yields on global bonds are prone to volatility. The yield on the 10-year Treasury note is now 4.201%, a drop of 1.0 basis point from its previous level. Yields on 10-year German bonds have decreased by 2.6 basis points, bringing them down to 2.646%. The yield on the 10-year UK gilt has now reached 4.631%, representing an increase of +4.2 basis points.
The value of stocks traded on stock markets all over the world is decreasing. The value of the Euro Stoxx 50 index has decreased by -0.03%. Today, the Shanghai Composite Index in China saw a loss of -0.82%. The Japanese Nikkei Stock Average experienced a loss of -1.46%.
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