Global Market Overview

Global markets are treading with caution as last Friday’s late afternoon slide in mega cap stocks keeps market participants on edge. With an overall mixed trend in the stock futures market, participants are currently maintaining a ‘wait-and-see’ approach, especially as the beginning of earnings reporting season draws near towards the end of this week.

Another crucial factor on participants’ radar is the release of the June Consumer Price Index (CPI) in the US this coming Wednesday. Inflationary concerns are paramount in shaping Federal Reserve policies, and hence, this release will be watched closely.

Economic Indicators

In the Asian economic sphere, China’s CPI stagnated in the June reading, maintaining a year-on-year unchanged status. However, the Producer Price Index (PPI) showed a contraction of 5.4% year-on-year, registering its fastest pace in seven years and marking the ninth consecutive month of contraction. These figures have led to increased speculation of China introducing further stimulus policies.

The US Treasury market displayed minor fluctuations, with the 2-year Treasury note yield down by four basis points to 4.90%, while the 10-year note yield remained unchanged at 4.04%.

Corporate Updates

Highlighting major corporate news:

1. NVIDIA: Goldman Sachs reaffirmed NVIDIA’s Buy rating and raised the price target from $440 to $495, marking a significant potential growth for the company.
2. Netflix: Morgan Stanley increased the price target to $450 from $350, while maintaining an Equal Weight rating.
3. Tesla: Tesla’s price target was increased from $185 to $265 by Jefferies, which nevertheless maintains a Hold rating on the company.
4. Fisker: Announced a $340 million convertible notes offering, potentially increasing to $680 million. In addition, according to the Wall Street Journal, the company has started rolling out its first models to US buyers.
5. Helen of Troy: The company exceeded expectations with earnings beating by $0.26 and revenue surpassing estimates, leading to the company reaffirming its FY24 earnings per share (EPS) guidance.
6. Taiwan Semiconductor Manufacturing: Reported an 11.1% year-on-year decrease in June 2023 revenues, reaching NT 156.4 billion.

Asian and European Markets and Developments

Asian markets started the week with mixed reactions: Japan’s Nikkei declined by 0.6%, Hong Kong’s Hang Seng advanced by 0.6%, China’s Shanghai Composite saw a minor gain of 0.2%, while South Korea’s Kospi slid by 0.2%. India’s Sensex managed a marginal gain of 0.1%, but Australia’s ASX All Ordinaries slipped by 0.5%.

European indices, in contrast, opened on a more positive note. The STOXX Europe 600 edged up by 0.1%, Germany’s DAX improved by 0.5%, U.K.’s FTSE 100 rose by 0.3%, France’s CAC 40 increased by 0.6%, and Italy’s FTSE MIB and Spain’s IBEX 35 each climbed by 0.6% and 0.2% respectively.

Key news from the global economic sphere includes U.S. Treasury Secretary Yellen’s conclusion of her China visit, during which she pointed out significant disagreements between the two nations. In Europe, the Dutch government has collapsed due to a disagreement over immigration policy, setting the stage for a general election later this year. European Central Bank policymaker Villeroy de Galhau stated that the ECB’s peak rate will soon be reached, and he believes that the inflationary peak has already been surpassed in France.

Upcoming Market Events

The week ahead is lined with numerous crucial events that could set the tone for global markets. US jobs data from last week has somewhat dampened speculation about the Federal Reserve leaving interest rates unchanged this month, but the outlook beyond that remains unclear. Payroll figures fell short of estimates, however, there were signs that wage inflation could pose a threat to the Federal Reserve’s battle against price gains.

Upcoming inflation indicators could potentially invigorate market bulls and take the S&P 500 above the current trading channel, according to Ed Yardeni, president of his namesake research firm. On the other hand, inflation readings that surpass expectations could increase fears that the Federal Reserve will have to tighten monetary policy, potentially causing a recession to quell inflation.

Key events this week include:

• US wholesale inventories (Monday)
• Speeches by Federal Reserve officials, including Mary Daly, Loretta Mester, Raphael Bostic, and Michael Barr (Monday)
• A speech by Bank of England Governor Andrew Bailey (Monday)
• St. Louis Fed President James Bullard speaks (Tuesday)
• Canada’s rate decision (Wednesday)
• Release of the US CPI (Wednesday)
• The Federal Reserve issues Beige Book (Wednesday)
• Further speeches by Federal Reserve officials, including Neel Kashkari, Loretta Mester, and Raphael Bostic (Wednesday)
• Another speech by Bank of England Governor Andrew Bailey (Wednesday)
• China’s trade report (Thursday)
• Eurozone’s industrial production figures (Thursday)
• US initial jobless claims and Producer Price Index (PPI) (Thursday)
• US University of Michigan consumer sentiment (Friday)