Wall St shines, China misses again

Wall St shines, China misses again

Wall Street’s Winning Streak: Apple, Amazon Earnings Propel Stocks to New Highs

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Wall Street is currently basking in the glow of record-breaking success, fueled by a favorable mix of disinflation, peak interest rates, and trend growth. This week, investors eagerly await earnings reports from two tech giants, Apple and Amazon, in what has already proven to be an outstanding earnings season. This surge in positive news has propelled stock prices to their highest levels in over a year, with the Nasdaq and the FANG-plus index experiencing their best day in two months. Even the S&P500 has reached its peak in over a year.

What could possibly go wrong?

Outside the borders of the United States, the situation is far less rosy, even if recent performance has led to a resurgence of the dollar’s strength on foreign exchanges. The Chinese economy, in particular, has been stuttering, with official business surveys indicating that manufacturing has contracted for a fourth consecutive month. The services and construction sectors are also showing signs of stalling. While hopes of government stimulus measures have surfaced, concerns about a weak property sector and worsening deflation fears persist. Unfortunately, Beijing’s response has merely consisted of piecemeal actions and reassuring words without concrete plans for a comprehensive solution.

The eurozone’s second-quarter economic rebound, most likely hampered by the struggling Chinese industrial sector and diminishing demand for luxury goods, demonstrated only half the growth achieved in the United States. Additionally, inflation in the eurozone remains more than two percentage points higher, with core inflation exceeding July forecasts. On a different note, the Bank of England is poised to raise interest rates again this week, with money markets indicating a 66% chance of another quarter-point increase to 5.25%. Meanwhile, despite the Bank of Japan’s recent monetary policy adjustment and its warning about rising prices and wages, the bigger picture for the Japanese economy remains largely unchanged. While Japanese bond yields have seen a slight increase, the weakening yen has provided a boost to Tokyo stocks.

Looking ahead, Wall Street prepares for another week of heavy earnings reports, with the highly anticipated July U.S. employment report set to be released on Friday. Despite Monday’s marginally positive stock futures and Asia’s response to Friday’s gains, European indexes have shown little change. U.S. Treasury yields remain steady, and the dollar has strengthened, primarily due to a three-week high in the dollar/yen exchange rate. Conversely, eurozone banks have rebounded, unfazed by the European Banking Authority’s stress tests that revealed some banks did not meet binding capital requirements under extreme macroeconomic scenarios.

Key Events to Watch on Monday: – U.S. corporate earnings: Loews, Arista Networks, Eversource Energy, Welltower, Western Digital, ON Semiconductor, SBA Communications, Hologic, Monolithic Power, Republic Services, Diamondback Energy, Avalonbay – U.S. July MNI Chicago business survey, Dallas Fed July manufacturing survey – U.S. Treasury auctions 3-, 6-month bills

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In conclusion, while Wall Street revels in its recent successes and a surge of positive earnings reports, the global economic landscape reveals uncertainties and challenges. China’s slowing economy, the eurozone’s struggling rebound, ongoing inflation concerns, and approaching policy decisions by central banks are all factors that could impact the continuation of Wall Street’s winning streak. As investors eagerly await Apple’s and Amazon’s earnings reports, the subsequent market reaction will shed light on the sustainability of this optimistic period.

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