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Morning Briefing: July 17, 2023

Markets Overview

The equity futures market presents a mixed bag as trading cools down after last week’s rally, anticipating an upcoming week filled with Q2 earnings reporting and economic data. Despite the subdued activity today, the market buzz is set to increase come Tuesday with earnings announcements expected from heavyweights such as Bank of America, Morgan Stanley, and Lockheed Martin. Furthermore, the June Retail Sales and Industrial Production reports will provide substantial economic data to further shape the market’s trajectory.

Early today, the market sentiment is marred by some mixed data from China. Despite stronger-than-expected growth in Fixed Asset Investment and acceleration in industrial production, weaker-than-expected increases in Q2 GDP and June retail sales paint a less than rosy picture of the Chinese economy. This ambiguous data contributes to a lackluster performance in the equity futures market, dragging down oil and copper futures.

In a separate development, wheat futures are up by 3.2% following reports of Russia suspending its grain deal with Ukraine.

Economic Calendar

The lone U.S. economic release scheduled for today is the July Empire State Manufacturing Survey, set to be unveiled at 8:30 a.m. ET. The consensus expectation is a score of -8.0, a steep fall from the prior 6.6.

Corporate News

In corporate news, several developments are driving market movements:

  • Microsoft (MSFT) and PlayStation (SONY) have inked a binding agreement to maintain Call of Duty on PlayStation, following Microsoft’s acquisition of Activision Blizzard. However, the tech giant now faces a potential EU competition investigation, according to Financial Times.
  • Activision Blizzard (ATVI) got a boost from the US 9th Circuit Court of Appeals, rejecting the FTC appeal to block Microsoft’s acquisition.
  • Tesla (TSLA) announced that the first Cybertruck has rolled off the production line in Texas.
  • PepsiCo (PEP) has been downgraded to Equal Weight from Overweight by Morgan Stanley.
  • United Airlines (UAL) has struck a four-year labor agreement with its pilots’ union, which includes raises of up to 40% over the period.
  • AT&T (T) has been downgraded to Neutral from Buy by Citigroup.
  • Chewy (CHWY) has been upgraded to Buy from Neutral by Goldman Sachs.
  • Paramount Global (PARA), according to The Wall Street Journal, is reportedly in discussions with creditors.
  • State Street Corp. (STT) has been downgraded to Underweight from Neutral by JPMorgan.
  • Apellis Pharmaceuticals (APLS) reports an adverse event with Syfovre.

Global Market Trends

Overseas, European stocks and oil are retreating, and bonds are rallying as more signs point to a slowdown in China’s economy. LVMH and Hermes International lost more than 4%, leading declines among French luxury stocks. The CAC 40 Index fell by 1.4%. Richemont, the owner of Cartier, plunged 9% after reporting an unexpected drop in sales from the Americas.

China’s slowing growth casts doubt on the narrative that Chinese consumers emerging from Covid lockdowns would buoy the global economy, despite rising US and European interest rates. As a result, banks including JPMorgan Chase & Co., Morgan Stanley, and Citigroup Inc. have downgraded their China growth forecasts for the year. This puts Beijing’s official GDP target of around 5% at risk.

The MSCI ACWI, an index of stocks worldwide, dipped 0.1% on Monday after surging 3% last week. Shares in mainland China underperformed in Asia. Due to its significant reliance on the Chinese import market, European stocks are particularly exposed to these downturns.

Looking ahead, the next pressure point for markets will be earnings. Hundreds of companies are expected to report in the coming weeks, with S&P 500 firms predicted to post a 9% drop in Q2 profits—the worst season since 2020. The situation in Europe may be even bleaker with a projected 12% slump.

Key Events This Week

For this week, there are key events to keep an eye on:

  • G-20 finance ministers and central bankers are meeting in India today, Monday.
  • European Central Bank President Christine Lagarde speaks later today.
  • US retail sales, industrial production, business inventories, and cross-border investment data are due out Tuesday.
  • Eurozone and UK CPI data will be released on Wednesday, followed by US housing starts.
  • China will announce loan prime rates on Thursday, along with US initial jobless claims, existing home sales, and the Conf. Board leading index.
  • Japan’s CPI data will be released on Friday.




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