Good morning, and welcome to today’s financial briefing for September 6th, 2023. As the markets re-open after the holiday weekend, we’ve got a lot to talk about. From equity futures to global economic data, the landscape has undergone some shifts you’ll want to know about.
Market Overview: U.S. Equity Futures and Interest Rates
Equity futures indicate a subdued start this morning, as mega-cap stocks pre-open with losses. This is capping gains across the broader market. This softer opening comes on the heels of rising market rates, which investors should keep an eye on. The 2-year yield has increased by four basis points, now standing at 4.92%. Meanwhile, the 10-year note yield has climbed up by five basis points to 4.22%.
Goldman Sachs Weighs in on Recession Odds
Optimism is in the air as Goldman Sachs lowers its probability of a U.S. recession from 20% down to 15%. This suggests increased confidence in the U.S. economy, contrasting sharply with economic indicators from other global markets.
Global Economic Indicators: Australia and China
The Reserve Bank of Australia has decided to hold its cash rate steady at 4.10%, aligning with market expectations. In contrast, economic activity in the Asia-Pacific region is a mixed bag. China’s Caixin Services PMI (Purchasing Managers’ Index) decelerated again in August, hitting the lowest level this year. Meanwhile, Australia’s Services PMI remained in contraction for the second month in a row.
Eurozone Concerns: Services PMI and ECB Dilemma
The latest PMI readings for August show a renewed contraction in the Eurozone’s service sector. These figures add fuel to concerns that the European economy is sliding towards recession. The European Central Bank (ECB), which is scheduled to meet next week, faces a difficult decision regarding interest rates amid recession fears and above-target inflation.
U.S. Economic Data: Factory Orders Report
Today’s key U.S. economic data is limited to the July Factory Orders report, set to be released at 10:00 a.m. ET. This report could provide some insights into the state of the U.S. manufacturing sector, which in turn could influence market movements.
Corporate News Roundup: Upgrades, Replacements, and Acquisitions
Stock Upgrades
- Oracle (ORCL): Upgraded to Overweight from Equal Weight at Barclays, currently trading at $123.08, up 1.8%.
- American Express (AXP): Upgraded to Outperform from Sector Perform at RBC Capital Markets, trading at $160.45, up 0.5%.
S&P 500 Replacements
- Blackstone (BX) will replace Lincoln National (LNC) in the S&P 500, effective September 18.
- AirBnb (ABNB) will replace Newell Brands (NWL) in the S&P 500, effective September 18.
Mergers & Acquisitions
- NextGen Healthcare (NXGN): Thomas Bravo is in advanced talks to acquire NXGN, as per Bloomberg reports.
Other Corporate News
- Walt Disney (DIS) is urging Spectrum (CHTR) customers to switch to Hulu amid an ongoing dispute.
- KLA Corporation (KLAC) has announced an increase in its quarterly dividend to $1.45/share.
- Manchester United (MANU) reports failed bids to meet its asking price.
Currency and Global Markets
The U.S. dollar has strengthened by as much as 0.5% against its Group-of-10 peers, reaching its highest level since March. European stocks have declined, while S&P 500 futures point to a lower opening on Wall Street.
Conclusion: A Mixed Bag but U.S. Resilience
While the global economic picture is a bit gloomy, especially with concerns over Eurozone recession and slower growth in China, the U.S. economy remains relatively robust. With Goldman Sachs lowering its U.S. recession probability, and the dollar strengthening, it seems like the U.S. is standing its ground in an otherwise shaky global environment.
Thank you for joining us for this morning’s briefing. Stay tuned for the Factory Orders report at 10:00 a.m. ET, and keep an eye on those market rates. It’s shaping up to be an interesting trading day ahead.
