Today’s Big Picture
Asia-Pacific equity indexes ended today’s session down across the board, except for Japan which gained 1.11% after the current ruling coalition solidified its position in the latest election. India’s Sensex declined 0.16%, South Korea’s KOSPI fell 0.44%, Taiwan’s TAIEX was down 0.86% while Australia’s ASX All Ordinaries and China’s Shanghai Composite lost 1.23% and 1.27%, respectively. Hong Kong’s Hang Seng led the way, down 2.77% on technology and casino stock weakness. By mid-day trading, major European equity indices are down across the board and U.S. futures point to a weak open later this morning.
While we start the week off on a rather quiet note, that will fade as we move through the week receiving several key pieces of data for inflation and consumer spending just as the June quarter earnings season kicks into gear. In recent weeks, recession and inflation have been the two main narratives influencing the market. A second set of narratives are about to join the fray: is it time to go bargain shopping? And, will the June quarter earnings season run the risk of downward revisions for the second half of 2022? While stocks have been beaten up, voices citing cheap historical valuations are emerging but whether stocks are truly cheap will be revealed by June quarter results and updated guidance.
Fresh energy concerns for Europe are in the headlines — see Data Download for more on that. Over the weekend, Shanghai confirmed the increasingly dominant BA.5 omicron variant sub-strain has been found to be pushing daily new cases to the highest since late May. Shanghai is imposing more rounds of mass testing, two weeks after officials declared victory over Covid. Naturally, there are concerns that lockdown measures could return. Meanwhile, scientists have shared that the newest variant – dubbed BA.2.75 – may be able to spread rapidly and get around immunity from vaccines and previous infection. It is currently unclear whether this omicron variant is more virulent than others, including the globally prominent BA.5.
Japan’s ruling Liberal Democratic Party (LDP)-Komeito coalition secured 76 seats and retained majority in Japan’s upper house of parliament in elections on Sunday, just two days after the assassination of former Prime Minister Shinzo Abe.
Retail sales in Italy climbed 7% YoY in May, easing from a downwardly revised 8.3% the previous month. Sales slowed for both food (4.5% vs 5.2%) and non-food (9.1% vs 11.2%).
The Nord Stream 1 pipeline, the biggest single pipeline carrying Russian gas to Germany, began annual maintenance earlier today. That work is expected to stop the pipeline for 10 days, however given the current Russia-Ukraine war concerns are that shutdown may be extended, pressuring efforts to fill storage tanks for the upcoming winter, driving additional emergency measures, and resulting even in higher energy bills for consumers.
We have a rather quiet start for the week’s U.S. economic data, but things will spring into action later this week with the June data for the Consumer Price Index and the Producer Price Index as well as Retail Sales. Given concerns about inflation and the Fed’s path to address it as well as those for consumer spending, all three reports will closely reviewed and likely influence how we end the trading week.
After some big days earlier in the week, Friday saw equities take a breather as all sectors traded slightly off except for Healthcare, Technology and Consumer Discretionary although the last two of that short list were essentially flat. Strong payroll numbers are generally a good thing but, in this environment, too strong a number hints at too strong an economy which potentially can lead to a more hawkish Fed. As we roll into second quarter earnings, we’ll get a clearer picture of how the economy is faring given high energy costs and their inflationary impact.
Here’s how the major market indicators stack up year-to-date:
- Dow Jones Industrial Average: -13.76%
- S&P 500: -18.19%
- Nasdaq Composite: -25.63%
- Russell 2000: -22.14%
- Bitcoin (BTC-USD): -56.88%
- Ether (ETH-USD): -69.36%
Stocks to Watch
Before trading kicks off for U.S.-listed equities, AZZ Inc. (AZZ) and Greenbrier Companies (GBX) are expected to report their latest quarterly results but given we are in the quiet period for companies, readers should be on watch for earnings pre-announcements.
Elon Musk sent a letter to Twitter (TWTR) formally notifying the company that he was “terminating the Merger Agreement because Twitter is in material breach of multiple provisions of that Agreement, appears to have made false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement, and is likely to suffer a Company Material Adverse Effect.” Twitter responded saying it is “committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plan to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery.” In response to the weekend’s developments, TWTR shares are trading down early this morning.
Macau closed all its casinos for the first time in more than two years on Monday after a coronavirus outbreak in the world’s biggest gambling hub. Authorities have ordered non-essential businesses, which includes over 30 casinos, to shut for a week. Casino stocks with exposure to Macau include Wynn (WYNN) Resorts, Las Vegas Sands (LVS), and MGM Resorts (MGM).
Boeing (BA) announced it will fly the newest and largest members of its 737 MAX and 777X airplane families at the Farnborough International Airshow this month, and present new tools in the push toward more sustainable and autonomous flight.
Frontline (FRO) announced it entered into a definitive Combination Agreement with Euronav NV (EURN) for a stock-for-stock combination based on an exchange ratio of 1.45 FRO shares for every 1.0 EURN share
Shares of ASIC chips company Nano Labs (NA) that serves the crypto mining machine market as well as some metaverse-related computing applications are expected to start trading on July 12. COVID-19 test marketer Virax Biolans Group (NASDAQ) targets its shares debuting on July 14. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.
After Today’s Market Close
On the Horizon
Tuesday, July 12
- Japan: Producer Price Index – June
- Germany: ZEW Current Conditions, Economic Sentiment – July
- Eurozone: ZEW Economic Sentiment – July
- US: NFIB Small Business Optimism Index – June
- OPEC Monthly Report
Wednesday, July 13
- China: Import/Exports – June
- UK: Construction Output, Industrial Production, Manufacturing Production – May
- Germany: Consumer Price Index – June
- Eurozone: Industrial Production – May
- US: Consumer Price Index – June
Thursday, July 14
- Japan: Industrial Production & Capacity Utilization – May
- US: Weekly Initial & Continuing Jobless Claims
- US: Producer Price Index – June
- US: Fed Beige Book
Friday, July 15
- China: Housing Prices, Industrial Production, Retail Sales – June
- China: China Thomson Reuters IPSOS PCSI – July
- China: 2Q 2022 GDP
- UK: Car Registrations – June
- Germany: Car Registrations – June
- Italy: Consumer Price Index – June
- US: Retail Sales – June
- US: Empire Manufacturing Index – July
- US: Industrial Production & Capacity Utilization – June
- US: Business Inventories – May
- US: Michigan Consumer Sentiment Index – July
Thought for the Day
“Bad days are part of the process, don’t give up.” ~ Anonymous
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.