European indices close the session with mixed results

Modest gains and losses for most of the major indices

The European indices are closing the session with mixed results and modest changes for most of the major indices:

  • German DAX, -0.1%
  • France’s CAC, +0.7%
  • UK’s FTSE 100, +0.35%
  • Spain’s Ibex, +0.1%
  • Italy’s FTSE MIB, unchanged
In other markets as London/European traders look to exit:
  • Spot gold is down $-3.20 or -0.18% at $1809.70.
  • Spot silver is up $0.15 or 0.56% $25.51
  • WTI crude oil futures are off their lows but still down about $1.10 or -1.54% at $70.46. The low price reached $69.18.
  • The price of bitcoin is trading just above the $38,000 level at $38,065
In the US stock market, the major indices are trading in the black with the NASDAQ lagging the Dow and S&P.
  • Dow industrial average +200 points or 0.58% at 35,038.48
  • S&P index up 20.03 points or 0.46% at 4407.19
  • NASDAQ index up 9.6 points or 0.07% at 14690.73
In the US debt market, the benchmark 10 year yield is trading above and below unchanged on the day. It is currently up 0.2 basis point at 1.1740%.

Slowing Chinese growth prospects

Slow down

The latest services and manufacturing PMI’s from China show a slow down in growth that doesn’t bode well for Q3 and Q4. The official PMI print came in at 50.4 for July, which was a drop from the previous month’s reading of 50.9. Of concern was that new orders fell 0.6 points and new export orders fell too. The services came in at 53.3 which was a fall from 53.5 in June. Furthermore, Iris Pang, the chief economist for ING on China has noted a drop in investment on equipment. Pang thinks that hints at two things. Firstly, is it that the chip shortage is holding back availability?Secondly, is it that companies sense lower growth prospects, so they are holding back investments? Either way Pang notes a mood of slower growth that is starting to emerge from China.

Why is this happening now?

The reason for the slowing growth prospects can be attributed to a number of factors: the global shortage of semiconductor chips, the rising delta variant, slowing real estate activity in China as regulators tighten purchase polices and mortgage limits, as well as increasing tensions between the US and China and the ‘tech war . Furthermore, President XI, has announced further policy moves from China and they could end up sacrificing short term growth for longer tern policy aims. China is trying to navigate some domestic reforms including the deleveraging of the the real estate sector, reforming data privacy and micro lending. So, there are a handful of issues to potentially further slow down growth.

More stimulus from China

China has promised more stimulus, so the recovery should find support from China. There is nothing to particularly note here apart from it is worth keeping on eye on China’s growth metrics from here. China cabinet said in July that China will  “use monetary policy tools, including RRR cuts, in a timely way to further step up financial support for the real economy, especially small firms”. The RRR cut is the cash requirement that banks are required to keep. By cutting the RRR this means banks have more money to lend because they don’t need to hold so much cash. A further RRR cut could well be a first port of call and should boost China’s stocks.

Hang Seng support.

Key support for the Hang Seng is marked below and any sharp falls lower should find buyers on a first test.

Slow down 

China market regulator launches investigation on auto chip distributors

China to target auto chip vendors next

Not much details being provided besides that they will punish vendors that “break the price rule”. I reckon they are a bit ticked off by the exorbitant surge in prices but then again with raw material shortages, there’s a valid reasoning for that.
In any case, when China does decide on something like this, more often than not there will be some form of follow-up action taken in due time.

China says it is to test all Wuhan residents for COVID-19 amid delta variant outbreak

China confronts its biggest spread of COVID-19 since January

The country reported 99 infections yesterday, before another seven cases were announced in Wuhan and one more in Beijing later in the day.
The latest spread is a bit concerning considering the supposedly extremely tight restrictions in place, especially in Wuhan.
The headline here is one that might border on being uncomfortable for risk assets as it could suggest that the risk of the delta variant spread is starting to have a broader impact across recovering economies all over the world.

US said to have asked 24 Russian diplomats to leave by September 3 – visa expiry

Info comes via a Reuters report citing a weekend media piece.

  • Russia’s ambassador to the US says 24 Russian diplomats have been asked to leave by Sept. 3
  • after their visas expire
  • Ambassador Anatoly Antonov did not say whether the U.S. action was prompted by a particular dispute.
Reuters link is here for more. Reuters include some speculation on why this measures have been taken.
Info comes via a Reuters report citing a weekend media piece. 

US stocks close session with mixed results

Dow Jones, S&P give up gains and close in the red. NASDAQ closed mostly higher

The US stock market lost steam into the close with Dow industrial average and the S&P 500 closing in the red and giving up earlier gains. The NASDAQ index squeaked out a small gain on the day.

The final numbers are showing:
  • Dow industrial average -97.11 points or -0.28% at 34838.36
  • S&P index -8.11 points or -0.18% at 4387.15
  • NASDAQ index rose 8.39 points or 0.06% at 14681.07
  • Russell 2000 index fell -10.75 points or -0.48% at 2215.50
As the day went by, lower yields on the back of expectations of slower growth due to the Covid Delta variant, started to weigh on the major indices.  The Dow industrial average was up as much as 256.64 points. The S&P index was up as much as 25.64 points and the NASDAQ index is up as much as 97.7 points before reversing back to the downside and closing near the lows for the day.
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