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Morning Briefing: July 5, 2023

Market Overview

Stock market indices are indicating a potentially lower open today, as geopolitical tensions rise and global growth fears resurface. The S&P 500 and Nasdaq 100 futures have both dropped by around 0.5%, suggesting a weaker start for US stocks following the Independence Day holiday. European stocks are also down, following weak service industry data from China which has reignited concerns about global economic outlook.

Geopolitical Developments

The US is reportedly aiming to limit Chinese access to cloud computing, potentially impacting tech giants such as (AMZN 129.72, -0.50, -0.4%) and Microsoft (MSFT 335.53, -2.46, -0.7%). Concurrently, China’s Ministry of Commerce has announced a new regulation requiring foreign entities to request permission to export gallium and germanium from the country.

Global Economy

Concerns about global growth have emerged following the release of PMI figures from major economies. China’s Caixin Services PMI fell to its lowest level since January, although it remained in expansion territory at 53.9. PMI readings from Germany, UK, France, Italy, and Spain all slowed from May, with France’s reading contracting. Slowing economic growth across the globe is reducing demand for equities, even as major central banks continue their tightening stances.

Economic Data Release

Today, market participants will receive important economic data. This includes May Factory Orders at 10:00 a.m. ET ( consensus 0.6%; prior 0.4%) and FOMC Minutes from the June 13-14 meeting at 2:00 p.m. ET.

Corporate News

  • Netflix (NFLX 444.72, +3.28, +0.7%): Goldman Sachs has upgraded the entertainment company from Sell to Neutral.
  • UPS (UPS 179.00, -4.77, -2.6%): The Teamsters union has unanimously rejected a package from UPS, with the company leaving the negotiation table. This could potentially lead to a strike.
  • (AMZN 129.72, -0.50, -0.4%) and Microsoft (MSFT 335.53, -2.46, -0.7%): According to the Wall Street Journal, the U.S. is considering restrictions on Chinese access to cloud computing services, potentially impacting these tech giants.
  • Rivian Automotive (RIVN 20.85, +1.27, +6.5%): Amazon has begun rolling out its first electric delivery vans from Rivian in Europe.
  • Monster Beverage Corp.: The company’s shares have risen more than 2% in anticipation of its earnings report due on Thursday.

Bonds and Currencies

The yield on the two-year Treasury has fallen by about three basis points to 4.91%, while the 10-year yield fluctuates around 3.86%. The dollar has edged higher. Chinese equities have experienced further losses after weaker than expected Caixin China services PMI data, with the offshore yuan also falling.

Key Events this Week

Keep an eye on the following key events this week:

  1. OPEC International Seminar in Vienna.
  2. Release of the FOMC’s June policy meeting minutes.
  3. A ‘fireside chat’ with New York Fed President John Williams.
  4. US initial jobless claims, trade, ISM services, job openings on Thursday.
  5. Dallas Fed President Lorie Logan speaks on Thursday.
  6. US unemployment rate, nonfarm payrolls on Friday.
  7. ECB’s Christine Lagarde addresses an event in France on Friday.

Closing Remarks

As we head into today’s trading, it’s important to note the uncertainties surrounding global growth and the current geopolitical tensions. These factors are likely to influence market sentiment and could lead to heightened volatility. Stay tuned for the release of important economic data and key events later in the week.




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