Global Stocks Climb on China Stimulus Plans

Morning Markets

September S&P 500 futures (ESU22) this morning are up by +0.45%.  U.S. stock indexes followed global stocks higher today after China said it was considering a $220 billion infrastructure stimulus plan. The plan's announcement also boosted commodity prices, with copper up more than +4%.  That, in turn, pushed mining stocks and basic resource companies higher.

Also, U.S. semiconductor stocks are moving higher in pre-market trading after Samsung Electronics reported a larger-than-expected increase in quarterly revenue.  Samsung’s revenue jump eased concern about weakening consumer demand and soaring material costs.

This morning’s U.S. economic data was bearish for stocks.  U.S. weekly initial unemployment claims unexpectedly rose +4,000 to a 5-1/2 month high of 235,000, showing a weaker labor market than expectations of a decline to 230,000.  Also, the May trade deficit of -$85.5 billion was wider than expectations of -$84.7 billion, which has negative GDP implications.

The Euro Stoxx 50 today is up by +1.63%, led by gains in mining stocks and steelmakers after the Chinese government said it was considering a $220 billion infrastructure stimulus package to boost its economy.  European chip stocks also gained today after South Korea’s Samsung Electronics reported a better-than-expected increase in quarterly revenue. 

Today’s Eurozone economic data was bearish for stocks after German May industrial production rose +0.2% m/m, weaker than expectations of+0.4% m/m.

Asian markets today closed higher.  China’s Shanghai Composite Index closed up by +0.27%, and Japan’s Nikkei stock index closed up by +1.47%. 

China’s Shanghai Composite Index today recovered from a 1-1/2 week low and closed higher on signs the government will boost stimulus measures.  China's Ministry of Finance was considering allowing local governments to sell 1.5 trillion yuan ($220 billion) of special bonds this year to finance infrastructure spending.  Chinese stocks initially moved lower today on pandemic concerns after Shanghai reported 54 Covid infections Wednesday, the most since May, which may prompt the government to ramp up restrictions and lockdowns to curb the spread of the virus.

Japanese stocks rallied today, led by gains in semiconductor stocks, after Samsung Electronics reported a better-than-anticipated 21% jump in quarterly revenue, easing fears about the impact of weakening consumer demand.  A negative factor for stocks was the report from Jiji that said the Bank of Japan (BOJ) is likely to consider raising its quarterly inflation forecast to its target level of 2% or above for the year ending next March from the 1.9% view it gave in April.  Also, the BOJ is likely to cut its growth forecast for this year from the current 2.9% view.  The revisions are likely to reinforce BOJ Governor Kuroda’s case that the economy needs support through the continuation of monetary easing.

Pre-Market U.S. Stock Movers

U.S. semiconductor companies are climbing in pre-market trading after Samsung Electronics reported a better-than-expected +21% jump in quarterly revenue.  Nvidia (NVDA), Intel (INTC), Micron Technology (MU), and Advanced Micro Devices (AMD) are all up more than +1%.

Seagen (SGEN) jumped more than +5% in pre-market trading after a Wall Street Journal report said that Merck & Co. is in advanced talks to buy Seagen for above $200 a share.

Bed Bath & Beyond (BBBY) rallied nearly +10% in pre-market trading on signs of insider buying after regulatory filings showed that interim CEO Gove and a pair of directors bought shares in the firm.

GameStop (GME) rose +9% in pre-market trading after announcing a for-for-one stock split in the form of a dividend. 

Freeport-McMoRan (FCX) jumped nearly +5% in pre-market trading after the price of copper soared more than +4% as China considered a $220 infrastructure stimulus plan. 

AbbVie (ABBV) slid nearly -1% in pre-market trading after cutting its full-year adjusted EPS forecast to $13.78-$13.98 from a prior forecast of $14.00-$14.20. 

Kellogg (K) fell nearly -2% in pre-market trading after UBS cut its recommendation on the stock to neutral on significant inflation headwinds.

Kohl’s (KSS) dropped -2% in pre-market trading after Bank of America cut its recommendation on the stock to underperform from neutral.

United Airlines (UAL) slid -1% in pre-market trading after Argus Research cut its recommendation on the stock to hold from buy.  

Today’s U.S. Earnings Reports (7/7/2022)

5E Advanced Materials Inc (FEAM), Enochian Biosciences Inc (ENOB), Helen of Troy Ltd (HELE), HF Foods Group Inc (HFFG), Kura Sushi USA Inc (KRUS), Park Aerospace Corp (PKE), WD-40 Co (WDFC).

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