Stocks Slip on Weak Chinese Economic Data

Morning Markets

September S&P 500 futures (ESU22) this morning are down -0.62%.  U.S. stock indexes are under pressure today as disappointing economic data from China signals a slowdown in the world’s second-largest economy that undercuts global growth prospects.  Energy, mining, and commodity-producing stocks are leading losses today as the weak Chinese economic data suggest reduced commodity demand.  Stock indexes extended their losses after this morning’s U.S economic data showed the Aug Empire manufacturing survey of general business conditions contracted at the steepest pace in more than two years.

Sep WTI crude oil prices this morning are down more than -5% after weaker than -expected Chinese economic data signals a slowdown in the Chinese economy that is bearish for energy demand. Also, Iran said it would inform the EU of its official position on a draft text to revive the 2015 nuclear accord by Monday night, signaling it may be nearer to an agreement with the U.S. over a deal that could restore its oil exports to global markets. 

The U.S. Aug Empire manufacturing survey general business conditions plunged -42.2 to -31.3, weaker than expectations of 5.0 and the steepest pace of contraction in 2-1/4 years.

The Euro Stoxx 50 today is down -0.08%.  The Euro Stoxx 50 fell back from a 2-1/4 month high today and is slightly lower on global economic concerns after weaker-than-expected Chinese economic data point to a slowdown in China that may crimp global growth.  European stocks today initially moved higher on signs that the pace of price increases may be slowing after the German July wholesale price index rose at the slowest pace in 5 months.  Also, positive corporate news buoyed healthcare stocks.

The German July wholesale price index rose +19.5% y/y, the slowest pace of increase in 5 months.

Asian markets today settled mixed.  China’s Shanghai Composite index today closed down -0.02%. Japan’s Nikkei index rallied to a 7-1/4 month high and closed up +1.14%.  Chinese stocks settled slightly lower as weaker-than-expected economic data signal a slowdown in China ‘s economy.  Property stocks led losses in the overall market after Chinese home prices in July fell for the eleventh consecutive month.  Chinese stocks recovered most of their losses after the PBOC unexpectedly lowered interest rates.

The PBOC unexpectedly cut its 7-day reverse repurchase rate by 10 bp to 2.00% and cut its 1-year medium-term lending facility rate by 10 bp to 2.75%.

China July new home prices fell -0.11% m/m, weaker than expectations of -0.10% m/m, and the eleventh consecutive month home prices have fallen.

China July industrial production rose +3.8% y/y, weaker than expectations of +4.3% y/y.

China July retail sales rose +2.7% y/y, weaker than expectations of +4.9% y/y.

Japan’s Nikkei Stock Index rallied to a 7-1/4 month high today, helped by a weaker yen and continued stimulus by the BOJ.  Last Friday’s rally in the S&P 500 to a 3-1/2 month high also provided carry-over support to Japanese stocks.  Gains in Japanese sticks were limited after today’s data showed the Japanese economy grew less than expected in Q2.

Japan Q2 GDP rose +2.2% (q/q annualized), weaker than expectations of +2.6%.  The Q2 deflator fell -0.4% y/y, a smaller decline than expectations of -0.8% y/y.

Pre-Market U.S. Stock Movers

Cisco Systems (CSCO) is down nearly -1% in pre-market trading after Citigroup said the company is losing market share as supply chain issues hurt the company more than its peers.

Energy companies and energy service providers are falling in pre-market trading, with crude prices down more than -5%.  Occidental Petroleum (OXY) and Haliburton (HAL) are down more than -3%.  Also, Devon Energy (DVN), Marathon Oil (MRO), Diamondback Energy (FANG), and ConocoPhillips (COP) are down more than -2%.

Freeport-McMoRan (FCX) is down more than -3% in pre-market trading, with silver prices down more than -2% and copper prices down more than -3%.

Illinois Tool Works (ITW) is down more than -2% in pre-market trading after Deutsche Bank downgraded the stock to sell from hold.

Peloton Interactive (PTON) fell more than -2% in pre-market trading after the company reported a sweeping overhaul that includes cutting jobs, raising product prices, and outsourcing functions.

The Oncology Institute (TOI) jumped +7% in pre-market trading after Jeffries initiated the stock as a buy amid a bullish view on value-based care.

Unity Biotechnology (UBX) surged +15% in pre-market trading after Citigroup said the data for UBX1325 in patients with diabetic macular edema were better than expected.

Today’s U.S. Earnings Reports (8/15/2022)

Ginkgo Bioworks Holdings Inc (DNA), Thoughtworks Holding Inc (TWKS).

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