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Economic Slowdown in China Hit Global Stocks

Highlights:

  • USA
    Wall Street posted records again. The Dow Jones increased by 0.04% or 15.53; the S&P 500 gained 0.7%. Meanwhile, the Nasdaq added 0.045%.
  • ASIA
    The Nikkei lost by 1.62% or 453.96 points, to 27,523.19.
    The Kospi shed 1.16% or 37.09 to 3,171.29.
    The Hang Seng slipped by 0.8% or 210.16 points to 26,181.46.
  • EUROPE
    The Stoxx 600 declined by 0.51%

 

Wall Street posted the 4th recond in a row

Wall Street ended last week with records after excellent results of large American companies. 

The Dow Jones settled with a slight increase of 0.04% or 15.53 to 35,515.38. The S&P 500, which gained 0.16%, 7.17 points, closing at 4,468.

Wall Street has not seen four records in a row in these two indices since 2017.

The Dow Jones accumulated a rise of 0.9% in the whole week, while the S&P 500 gained 0.7%.

In contrast, despite the Nasdaq’s close with a gain of 0.045% or 6.64 on Friday, it slipped by 0.1% in the week.

In a week of a low volume of transactions, the New York stock market moved smoothly with many operators on vacation. 

The performance of large companies is behind the positive environment in the markets. They have celebrated better-than-expected results and were fueled by the rapid recovery of the US economy.

Nearly 90% of S&P 500 companies that have recently submitted second-quarter accounts have exceeded analyst expectations. According to data from the investment fund Blackrock, its the highest percentage since 2011.

Disney was among these companies. Figures the multinational conglomerate released were above expectations. Its income sharply rose after having been greatly diminished in the early stages of the pandemic.

Disney’s shares soared at the beginning of the session on Friday, although they finally finished with a more moderate advance of 1%.

However, analysts indicate that the strong growth in the US economy will be limited and that different scenarios are unfolding in the medium term.

 

US Financial data were above expectations

The employment data showed that the weekly number of applications for unemployment benefits in the United States fell to 375,000 last week, compared with 387,000 the previous week. 

Last week inflation remained at 5.4% year-on-year in July, in line with expectations. Investors fear that an excessive rise in prices will lead to the eventual withdrawal of monetary stimulus from the Federal Reserve.

The details of the report favored the perspective that the recent degree of inflation will not last long.

The approval in the US Senate of the infrastructure plan promoted by the Joe Biden government also contributed to the market optimism.

The program, valued at $1.2 trillion could be the largest in a decade, has yet to receive approval from the Lower House.

 

Nikkei slid due to concerns about economic recovery

The Nikkei fell this Monday due to concerns about the economic impact of the persistent covid-19 pandemic and a Strong yen that weighed on Japanese exporters. 

The Nikkei lost by 1.62% or 453.96 points, to 27,523.19.

The Topix declined by 1.61%, or 31.41 points, to stand at 1,924.98.

The Tokyo stock market started the session lower and sharpened its fall in the first minutes of trading. 

The Japanese economy expanded by 7.5% between April and June compared to 2020, when the Asian country declared its first state of emergency due to the covid-19.

Although the Japanese GDP progressed by 0.3% in quarter-on-quarter terms,  the improvement in private consumption continued to be slow, which has generated concern about the evolution of the recovery.

The yen’s strength against other currencies also weighed on the country’s exporters. The trend hurt them and contributed to the pessimistic mood in the Japanese market. 

The paper industry, storage, and port transport services reaped the most considerable losses of the day.

Logistics company Nippon Express shed 13.17%, the most significant drop among Nikkei-listed companies. It was followed by conglomerate Takara, losing 5.22%.

The transport company Nippon Yusen brought together the highest volume of operations of the session and rose by 3.35%.

Softbank Group plunged by 2.13%, the electronic components manufacturer Lasertec lost 2.05%. Meanwhile, the Japanese automotive group Toyota slid by 1.52%.

 

Kospi lost 1.16% after foreign-selling

Kospi, the South Korean Stock exchange, lost 1.16% or 37.09 to 3,171.29. The net selling by foreign investors has been truly unprecedented. 

Over the past five days, foreign investors’ net selling of the KOSPI was equivalent to 7.5 trillion won, the largest weekly loss.

Selling was particularly concentrated on two stocks, Samsung Electronics and SK Hynix. In short, Samsung Electronics’ net selling on the 13th was 2.36 trillion won and Hynix’s 225 billion won. Opinions are strongly divided over these companies. As the foreign selling offensive has progressed, positive expectations are emerging that there is no additional downward pressure on the two significant stocks and the indices. Conversely, some negative cautionary statements suggest that price adjustments are necessary as the price has risen too long after the COVID-19 pandemic. Of course, it is deeply related to the global stock market, including the United States. 

China plans to increase its GDP by 6% or more in 2021 Hang Seng falls on Chinese economic data

China’s blue-chip stocks tumbled on Monday after disappointing economic data raised new concerns about the outlook for the world’s second-largest economy. Still, bets on more stimulus to boost the shaky recovery limited losses.

China’s industrial production and retail sales growth slowed dramatically. They fell short of market expectations in July as new Covid-19 outbreaks and flooding disrupted business operations.

The Hang Seng, the Hong Kong Stock Exchange benchmark index, closed today with a loss after publication data on China’s industrial production in July, lower than expected by analysts.

It lost 0.8% or 210.16 points to 26,181.46. Meanwhile, the Hang Seng China Enterprises fell by 1.2%.

Among the sub-indices, Commerce and Industry fell by 1.94%. Besides, Finance added 0.38%, Real Estate advanced by 0.71%, and Services gained 0.95%.

Digital leaders did not have a good day. Meituan slumped by 5.14%. Tencent shed 3.49%, and Alibaba depreciated by 1.96%.

Car manufacturers also had a negative session. Geely slipped by 6.68%, and BYD lost 7.24%.

It was the best day for real estate titles such as Hang Lung Properties, adding 1.93%. Also, the insurance company Ping An climbed by 2.01%.

State oil companies settled mixed. Petrochina closed in the red, shedding 0.89%, and Sinopec added 1.38%.

The business volume of the session was 133,910 million Hong Kong dollars.

 

European equities started the week lower amid uncertainties

On Monday, the Stoxx 600 declined by 0.51%. Meanwhile, the EuroStoxx 50 shed 0.59%. 

The momentum on the equity markets allowed the Stoxx 600 index to climb ten consecutive sessions. However, the index started falling again at the start of the week.

The market has been affected by the slowdown of economic recovery in China. On the other hand, the decline in riskier stocks is further reinforced by the uncertainties caused by the collapse of the Afghan regime.

Market players will be watching the region’s development and the publication of the Fed’s minutes this week.

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