Politics drives the markets, concerns from Trump's statements, stock market news and company reports
Fundamental Reviews
• The sell-off in technology stocks picked up steam this week following reports that the United States is considering tightening restrictions on chip exports to China, adding to Donald Trump's comments on Taiwan that have raised geopolitical concerns about the sector. Chip investors are wary of Washington's more protectionist stance in recent years toward the U.S. semiconductor industry, which U.S. political leaders consider strategically important to compete with China. Bloomberg News reported Wednesday that the United States has told allies it is considering its toughest trade restrictions if companies continue to give China access to advanced semiconductor technology. That, and Republican presidential candidate Trump's announcement that Taiwan should pay the U.S. for its defense, triggered a sharp decline in shares of microelectronics companies, wiping out more than $500 billion in the company's market value.
• The focus will be on the European Central Bank's policy meeting, where the central bank is not expected to change its rate decision, focusing on comments from officials that could provide clues about the next rate cut. The comments are likely to weigh on the euro, which hit a four-month high on Wednesday as traders fully priced in the Federal Reserve's 25 basis point interest rate cut in September following the officials' comments. The yen faltered after hitting its highest level in six weeks on Thursday, with traders still spooked by Tokyo's expected intervention last week, which the Bank of Japan said could have amounted to about 6 trillion yen ($38.4 billion). Official spending data is expected at the end of the month.
• Late last night, ABC News reported new details about Biden's face-to-face weekend meeting with Senate Majority Leader Chuck Schumer. Schumer allegedly told the president that “it would be better for the Democratic Party and better for the country if he left.” Biden fell ill with coronavirus, but he is vaccinated and the symptoms are mild - White House. A good reason to give up your seat in the presidential race. Biden is ready to withdraw from the presidential race if he is diagnosed with health problems. The ground for care has been prepared. But who will compete with Trump?
• It is impossible to deprive Hungary of its presidency of the EU Council, but there are other levers of influence, - Vice-President of the European Commission.
• “I don’t like sanctions”: Trump remembered his good relationship with Putin and started talking about the role of China. Trump allowed the easing of sanctions against the Russian Federation as part of his “peace” plan for Ukraine. He recalled that he was on good terms with Putin, and also accused current US President Joe Biden of allegedly “forcing Russia and China to get married.”
• Trump wants to cut the corporate income tax rate to 15% - Bloomberg. Powell does not intend to change the head of the Fed ahead of schedule.
JP Morgan CEO Jamie Dimon is being considered as a candidate for Treasury Secretary.
• There were rumors that Xi Jinping suffered a stroke. The alleged apoplexy occurred during the third planning meeting of the Central Committee of the Communist Party of China, and at the moment little is known about the condition of the Chinese leader.
There is no official confirmation of this information.
• Trump may weaken the dollar if he wins the election - NYT. The newspaper calls this a “new era” for the US currency. Trump and his vice presidential running mate, J.D. Vance, are on the same page on a weak dollar, trade, taxes and getting tough on China.
The story has long been known to us and is quite real. We are preparing portfolios for USD devaluation.
• UK inflation in June is stable in June. 2% y/y regular inflation and 3.5% core.
Inflation in the Eurozone expectedly weakened from 2.6% to 2.5% y/y. Core inflation expectedly remained at 2.9% y/y.
• NATO is discussing the nationalization of Chinese ports and companies in Europe in the event of a conflict with the Russian Federation in the east of the continent - CNN. China has poured tens of billions of dollars into infrastructure investments as part of its Belt and Road Initiative, which European countries began joining in 2013.
• Ukraine blocked the transit of oil from a Russian company to Hungary via the Druzhba oil pipeline, - Hungarian Foreign Minister Szijjártó. Szijjártó complained to Russian Foreign Minister Lavrov and said that the problem needed to be resolved quickly.
• US housing construction is benefiting from lower mortgage rates. The number of building permits issued in June increased from 1.399 million homes (year-on-year) to 1.446 million. Construction volume increased by 3%.
• The Fed's Beige Book noted moderate growth rates in the US economy. Japan's exports rose for the seventh month in a row in June, helped by strong demand for chip-making machines, non-ferrous metals and plastics. Exports rose 5.4% y/y after rising 13.5% in May.
• Japan recorded a trade surplus of 224 billion yen ($1.43 billion) in June, its first surplus in three months.
Stock reviews
• Fed member Chris Waller: “I believe the time for a rate cut is approaching.” Timiraos: His speech is a marked shift from two months ago, when he suggested the Fed didn't need to cut rates until December. It is now clearly open to a decline in September.
• Instagram announced multi-track footage. Now you can add up to 20 different audio tracks to each image. This will give bloggers more freedom in terms of creativity and synchronization of audio and video, the press release says.
• Data from the Bank of Japan indicate additional interventions in the yen of $13 billion. Also released data on the current account of the Bank of Japan showed that an outflow of liquidity from the financial system in the amount of about 2.74 trillion yen ($17.3 billion) is expected on Wednesday due to with various transactions involving the public sector, in line with the previous forecast of liquidity outflows of about 600 billion yen - Nikkei.
• The Biden administration has told allies it is considering tougher restrictions on companies that still provide advanced chip technology to China despite existing export restrictions.
• Shares of ASML, which has been cited as a potential target, fell more than 10% after the Dutch chipmaker posted solid quarterly earnings. It's worth noting that shares of Intel (INTC) and GlobalFoundries (GFS) rose on Wednesday as both companies are expected to benefit from the US government's local semiconductor manufacturing initiatives.
• Trump increases pressure on Fed ahead of expected rate cut: "They know they shouldn't do it." Trump's interest is for the Fed to start cutting rates under him. Helping him win the election not for the Democrats, but for him. Trump, in an interview with Bloomberg, questioned US defense support for Taiwan. Assuming that an island claimed by China must pay for US protection.
• Shares of chipmaker TSMC fell 8%.
• Nvidia shares fell 6.6% during the session as Taiwan Semiconductor Manufacturing is the main maker of its artificial intelligence chips.
• Yesterday we saw an easy test of what would happen if China attacked Taiwan.
• Intel (INTC) shares held firm yesterday. Against the backdrop of a sell-off in other semiconductor stocks. They are seen as a beneficiary of increased export restrictions.
• Will Trump weaken Medicare? Wall Street thinks so. Investors believe that if Donald Trump is elected president, his administration will take a friendlier approach to large insurers that operate the Medicare Advantage program - WSJ.
• Amazon Prime Day sales statistics released. If people were worried about the election, they didn't let it show on the first day of Amazon's (AMZN) Prime Day. Adobe Analytics data shows that consumers spent $7.2 billion on the first day, up 11.7% from last year. It's the biggest e-commerce day of the year. Online sales were driven by electronics categories such as headphones and Bluetooth speakers, TVs, fitness trackers and tablets.
• According to Bank of America's July survey of global fund managers released Wednesday, 68% of respondents said a soft landing was the most likely scenario for the global economy over the next 12 months. This is the highest percentage of respondents expressing this opinion since January 2024.
• New housing construction accelerated in June as builders focused on increasing the size of multifamily projects. Housing starts rose 3% to 1.35 million units at a seasonally adjusted annual rate, according to Census Bureau data released Wednesday. Multifamily construction contributed to last month's growth. New construction of five or more apartments rose to a seasonally adjusted annual rate of 360,000, up from 295,000 a month earlier.
• The Economist about the US stock market. Stocks are on a stunning run, but there's a "but." Since the beginning of 2020, the nominal market value of the S&P-500 has grown by almost 80%, more than double the growth of US GDP. The index's cyclically adjusted price-to-earnings (CAPE) ratio is 36. It was only higher near the dot-com bubble and in 2021 - the periods leading up to the crashes.
At current interest rates, U.S. stock prices would have to fall by about a third for the gap between CAPE and real Treasury yields to return to the mean. For CAPE to return to its long-term average, they would have to fall by more than 50%.
• United Airlines (UAL) shares are neutral following the report.
• Farm equipment maker John Deere (DE) said it will no longer sponsor events to raise “social or cultural awareness.” Becoming the latest major US company to distance itself from diversity and inclusion efforts after coming under fire from conservatives.
• Shares in transport JB Hunt (JBHT) fell 7% yesterday after the report. Earnings in the second quarter fell from $1.81 per share a year earlier to $1.32 and fell short of analysts' expectations. JB Hunt's sales fell 7% in the period to $2.93 billion, compared with analysts' expectations of $3.02 billion.
• FIVE shares fell 25%. The discount retailer announced the departure of CEO Joel Anderson, who led the company for nearly a decade. The company also said it expects second-quarter sales to be between $820 million and $826 million, down from its previous forecast of $830 million to $850 million.
• GitLab (GTLB) shares rose 9%. Reuters reported that the software company is exploring a sale after attracting interest from potential buyers. Shares of Datadog (DDOG), cited as a potential buyer, fell 7%.
• The US Securities and Exchange Commission has approved the listing of ETH spot ETFs from Grayscale and Proshares.
The largest stocks yesterday after reports
JNJ +3.7%
ASML -12.7%
ELV -5.8%
PLD +1.4%
USB +4.6%
• US stocks were mixed and the Nasdaq fell sharply. The NASDAQ 100 had its worst day since December 2022 (-2.9%). Technology companies have come under dual pressure due to concerns over restrictions on US exports to China and Donald Trump's position on Taiwan.
Key events that could impact markets on Thursday:
• The ECB will publish a policy statement. ECB expected to keep rates unchanged, but policy and press conference will be closely watched
• Dallas Federal Reserve Bank President Laurie Logan, San Francisco Federal Reserve Bank President Mary Daly and Fed Commissioner Michelle Bowman will participate in the conference “Exploring Traditional Bank Financing Regimes in a Non-Traditional World.”
• Economic events: ECB meeting, wage data in the UK, consumer sentiment data from Gfk in the UK in July.
Reports
Premarket
TSM - Taiwan Semiconductor
DPZ - Domino's Pizza
NOK - Nokia
DHI - DR Horton
ABT - Abbott Laboratories
KEY - Keycorp
After
the NFLX market closes - Netflix
ISRG - Intuitive Surgical