Equities Greet August With Cautious Tone; Dollar Up: Markets Wrap

(Bloomberg) — Markets started August on a cautious note as investors reacted to recent news about corporate earnings and the health of China’s economy. The dollar showed modest increases.

Most read from Bloomberg

Mining shares were the biggest decliners in Europe after weak data on China’s manufacturing and property sectors, as Rio Tinto Plc and Anglo American Plc led their peers lower. Banks outperformed and HSBC Holdings Plc advanced after announcing a new share buyback program and earnings that beat estimates. In Asia, Toyota Motor Corp. closed at a record high following its stronger-than-expected operating result.

There are signs of a lull in the bullish sentiment that has fueled equity markets this year as traders prepare for big events later in the week, including a Bank of England interest rate decision on Thursday and US employment figures on Friday. The string of blockbuster earnings still to come before the week is out includes tech heavyweights Apple Inc. and Amazon.com Inc.

The Australian dollar fell against the dollar after the country’s central bank kept interest rates unchanged. Financial markets had predicted the decision, while economists expected a rise of 25 basis points. Australian bond yields extended declines after the decision.

U.S. stock futures were steady after the S&P 500 closed at a 16-month high on Monday, while the Nasdaq 100 posted its longest streak of monthly gains since August 2020.

The continued buoyant sentiment on Wall Street has led to a retreat among bearish institutional investors, economists and strategists as market returns and economic data continue to challenge expectations. The S&P 500 received its most bullish outlook yet from Oppenheimer Asset Management, which predicts further strength in stocks as the Federal Reserve approaches a pivot point and the U.S. economy remains robust.

The story continues

Chief Investment Strategist John Stoltzfus raised his year-end price target on the index to 4,900, giving way to a gain of nearly 7% through the end of the year, the most bullish among Wall Street strategists tracked by Bloomberg. The S&P 500 would end the year about 28% higher if his forecast comes true, the best performance since 2019.

Treasury 10-year yields traded near 3.95%, while a gauge of dollar strength rose 0.3%.

In China, home sales fell by the most in a year last month, underscoring why policymakers need to address faltering demand and a liquidity crisis in the sector. Caixin PMI numbers showed factory activity fell in July, missing economists’ estimates for a slight expansion.

Chinese investors are “still waiting to see some meaningful comeback in high-frequency indicators,” Alec Jin, investment director of Asian equities at abrdn, wrote in a note. “We expect targeted measures that can boost consumer income and demand in sectors such as automobiles, electronics and household products,” as well as more support for the real estate sector, he added.

The yen traded weaker against the dollar, contributing to Monday’s decline, amid sluggish demand at a 10-year bond auction. While investors had previously forecast the Bank of Japan moving towards letting interest rates rise after an adjustment to its yield curve control policy, it bought bonds on Monday to anchor rates.

The alignment with YCC “is great for the Japanese equity story,” Gareth Nicholson, chief investment officer and head of discretionary portfolio management for Nomura International Wealth Management, said on Bloomberg Television, referring to the yield curve management policy. “You have a measured, controlled policy change, controlled growth and controlled inflation at the moment – these are all things that investors like.”

Key events this week:

• Eurozone S&P Global Eurozone Manufacturing PMI, Unemployment, Tuesday

• US Construction Spending, ISM Manufacturing, Job Openings, Light Vehicle Sales, Tuesday

• China Caixin Services PMI, Thursday

• Eurozone S&P Global Eurozone Services PMI, PPI, Thursday

• Bank of England interest rate decision, Thursday

• US Initial Jobless Claims, Productivity, Factory Orders, ISM Services, Thursday

• Retail sales in the euro area, Friday

• US unemployment, non-farm payrolls, Friday

Some of the most important movements in markets:

Equities

• The Stoxx Europe 600 fell 0.1% at 8:25 London time

• S&P 500 futures were little changed

• Nasdaq 100 futures fell 0.2 percent.

• Futures on the Dow Jones Industrial Average were little changed

• The MSCI Asia Pacific Index fell 0.2 per cent.

• The MSCI Emerging Markets Index fell 0.2 per cent.

Currencies

• The Bloomberg Dollar Spot index rose 0.2 percent.

• The euro fell 0.1% to $1.0981

• The Japanese yen fell 0.3% to 142.68 per dollar

• The offshore yuan fell 0.3% to 7.1707 per dollar

• The British pound was little changed at $1.2830

Cryptocurrencies

• Bitcoin fell 1% to $28,908

• Ether fell 1.2% to $1,830.83

Bonds

• The yield on 10-year government bonds was little changed at 3.95%

• Germany’s 10-year yield was little changed at 2.48%

• UK 10-year yields were little changed at 4.31%

Raw materials

• Brent crude fell 0.2% to $85.28 a barrel. barrel

• Spot gold fell 0.4% to $1,956.80 a barrel. ounces

This story was produced with assistance from Bloomberg Automation.

–With assistance from Ishika Mookerjee.

Most read from Bloomberg Businessweek

©2023 Bloomberg LP