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Morning Briefing: August 11th, 2023

Market Overview

Stock futures have shown a mixed reaction, staying relatively unchanged after a stable finish the previous day. All eyes are set on two major economic updates:

  • July Producer Price Index at 8:30 a.m. ET: This will provide a glimpse into the wholesale prices, hinting at potential changes in retail prices and inflation.
  • Preliminary August University of Michigan Consumer Sentiment survey at 10:00 a.m. ET: A crucial indicator of consumer spending, which makes up a large part of the U.S. economy.

International Concerns: China in Focus

  • China’s Economic Indicators: Weak yuan loan growth for July has raised concerns about domestic demand. The property market further spooked investors as Country Garden announced an expected loss of approximately $8.0 billion for H1 2023.
  • European Equities: Markets in Europe are mirroring the anxiety stemming from Asia. Worries over local government debt in China and remarks from a US central banker have led to caution. The Stoxx 600 index has decreased by 0.8%, even as the British pound gains momentum.
  • Asian Markets: The MSCI Asia Pacific Index plummeted to its lowest in a month, largely driven by China’s internal financial challenges and external reactions.

Energy and Commodities

The International Energy Agency (IEA) has issued a cautionary note: anticipate tight supply in 2023 due to OPEC+ production cuts. However, a silver lining exists with the expectation of demand growth decelerating by 2024.

Oil prices have remained largely stable this week, although they did touch their highest level since November.

Bonds and Yields

The 2-yr note yield has decreased by one basis point to 4.82%, while the 10-yr note yield rose by two basis points, standing at 4.10%. Market sentiment reflects caution as San Francisco Reserve Bank President Mary Daly mentioned more steps are required to counter rising prices.

Corporate News Round-Up

  • Stanley Black & Decker: Wolfe Research has downgraded the company from Peer Perform to Underperform.
  • Reburn remains optimistic, maintaining its Buy rating and upping the price target from $220 to $230.
  • Savers Value Village: The company exceeded expectations on revenue and adjusted its FY23 outlook positively.
  • Flowers Foods: They surpassed revenue estimates and provided in-line guidance for FY23.
  • News Corp.: The company reported better-than-expected earnings but fell short on revenue.
  • Arco Platform: The company is set to go private, with shares valued at $14.00 each in cash.
  • Cano Health: The company revealed troubling Q2 results, hinting at substantial doubts about its future viability and announced a potential sale, among other strategic changes.

Additional Corporate Highlights include Virgin Galactic’s next space tourist mission, Oaktree Capital Management’s fundraising spree, and UBS Group AG’s decision to end its deal with the Swiss government regarding Credit Suisse.

Investment Trends

This week witnessed a significant move from stocks to haven assets. Cash funds observed inflows of $20.5 billion, bonds saw $6.9 billion in inflows, while US stocks experienced a setback with an outflow of $1.6 billion.

Currency markets have also been fluctuating. The Bloomberg Dollar Spot Index has taken a dip after an incline on Thursday. Despite this, the dollar is set for its fourth consecutive week of gains.

Christopher Wong of Oversea Chinese Banking Corp. commented on the USD trends, suggesting that its ascent might be limited in the near future.

Closing Thoughts

Economic indicators, corporate news, and international events suggest a cautious market environment. As we move further into the month, investors will be keenly watching how policymakers respond to the changing economic climate. Keeping an eye on reliable data and staying updated will be essential for making informed decisions in these turbulent times.




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