LONDON (Reuters) – A look at the day ahead from Karin Strohecker.
It’s a new week, a new month and time for a fresh start – but the problems niggling at markets this morning are still the same.
Chinese stocks’ continued rebound after a selloff caused by Beijing’s regulatory crackdown lifted markets across Asia. European and U.S. equity futures are also higher thanks companies’ second-quarter earnings that are up 120% and 90% respectively year-on-year.
Add to that more fiscal stimulus in the United States where senators unveiled a sweeping $1 trillion infrastructure plan that could pass this week.
But releases of Asia purchasing manager indexes (PMI) show clouds on the horizon; rising input costs and a new wave of coronavirus infection overshadowed solid global demand, highlighting the fragile nature of the region’s recovery.
Manufacturing activity rose in export powerhouses Japan and South Korea, but China readings confirm that growth is indeed slowing amid rising costs and extreme weather in the world’s second largest economy.
China’s central bank pledged over the weekend to maintain a prudent, flexible and targeted monetary policy to support growth while keeping the digital economy in check.
The growth concerns sent oil 1% lower and kept the dollar just above a one-month low.
More PMI readings are due today and Wednesday, but this week’s biggest datapoint is Friday’s U.S. payrolls — the last major jobs reading available to the Fed before its Jackson Hole summit, where many expect it to say when it will start tapering bond-buying.
Then there are geopolitical tensions. The United States and Britain have pointed the finger at Iran, blaming it for last week’s attack on an Israeli-managed petroleum product tanker that killed two people.
Back on the earnings front, HSBC continues the run of forecast-beating Q2 numbers, reporting first-half pretax profit that more than doubled from last year when it made huge provisions for pandemic-related bad loans.
Heineken, the world’s second-largest brewer, reported first-half earnings above expectations but said the rest of the year could be less rosy given cost pressures and COVID-19.
Finally, the U.S. debt ceiling suspension expired on the weekend, forcing the Treasury into extraordinary measures to get by. Later on Monday, it will announce its overall refunding plans.
Key developments that should provide more direction to markets on Monday:
-German retail sales June
-U.S. ISM manufacturing PMI
-Auctions: 6-m and 3m t-bills
-European earnings: HSBC, Axa, Heineken, Ferrari
-U.S. earnings: Royal Caribbean (Graphic: China PMIs, https://fingfx.thomsonreuters.com/gfx/mkt/mopanmdeava/China%20PMIs.PNG)
(Reporting by Karin Strohecker; editing by Sujata Rao)
