Report by Renta 4
Markets are expected to open with virtually no changes (Euro Stoxx 50 and S&P 500 futures flat), on a day of wait-and-see sentiment ahead of the official US employment report for July, and with oil prices rising again amid the deadlock in negotiations over the Strait of Hormuz.
Yesterday, Wall Street closed lower, albeit only slightly (S&P 500 down 0.18%, Nasdaq down 0.06%, Dow down 0.85%), with no clear narrative and yields rebounding by between 4 and 7 basis points (10-year ~4.6%) due to inflation fears linked to the oil price rebound. On the earnings front, despite very solid aggregate figures, the market once again punished disappointments harshly, particularly in the software sector: AppLovin fell 19.7% (missed on sales and weak guidance), Datadog fell 19% and HubSpot fell 19% (annual guidance cut), whilst SanDisk and Western Digital fell despite beating estimates, due to the high bar set by expectations. On the positive side, Parker-Hannifin was up 7.4% and ConocoPhillips beat forecasts.
Early this morning, the Asian session was mixed (Nikkei down 1%, Hang Seng up 0.15%, Shanghai up 0.49%). In China, the July trade balance showed a surplus of $112.5 billion (compared to $125.62 billion previously), with exports up 23% year-on-year and imports up 27.5% year-on-year, maintaining double-digit growth although at a slower pace than in June.
In Japan, household consumption contracted for the seventh consecutive month. Of note, Nintendo rose after beating profit forecasts, whilst SoftBank fell despite exceeding estimates. SpaceX held steady following the expiry of its lock-up period (~$100,000 million in shares eligible for sale).
In the Middle East, Brent crude rose by 1.6% to around $84 per barrel (although down 5% for the week) amid the deadlock over the Hormuz agreement: Iran intends to block the passage of US and Israeli vessels until it receives war reparations, and to charge “transit fees” that would include: refuelling costs, insurance and an environmental levy.
The shipping industry warns thatthe proposed route (entering via the Iranian channel, exiting via the Omani channel) is not viable due to sanctions: the US has banned shipping companies from paying a toll in exchange for transiting the Strait of Hormuz, and the insurer Lloyd’s has included a clause that voids marine insurance if ships pay a fee to Iran. Furthermore, clashes between Saudi forces and the Houthis have intensified in Yemen.
In the foreign exchange market, the yen has given back almost half of its gains following the joint US-Japan intervention. As for the Fed, according to the FT, Warsh will maintain his terse communication style and would be prepared to raise rates in September if inflation surprises on the upside.
On the macro front, yesterday in the US initial jobless claims remained subdued (199,000 compared to an estimate of 202,000 and a previous reading of 198,000), Q2 productivity came in higher than expected (1.4% compared to an estimate of 0.6%) and unit labour costs moderated (1.3% compared to an estimate of 2.1%). Today, the focus will be on the official July employment report: non-farm payrolls (80,000 estimated versus 57,000 previously), the unemployment rate (4.2% estimated, unchanged) and hourly wages (3.5% estimated year-on-year) – key data for gauging the Fed’s next moves.
As for corporate results, Allianz and Munich Re are reporting today in Germany, the latter having released very solid preliminary figures at the end of July.
