Stocks suffer as Chinas data figures disappoint

Stocks fell Tuesday as concern over the state of the economy – China in particular – and a decline in US banks combined to pressure Wall Street.

The Dow Jones Industrial Average slid 361.24 points, or 1.02 per cent, ending at 34,946.39 and breaking a three-day positive streak. The S&P 500 pulled back by 1.16 per cent, closing at 4,437.86 and ending the session below its 50-day moving average — a move that may signal the beginning of a downtrend. The Nasdaq Composite fell 1.14 per cent to 13,631.05.

Financial stocks in the US weakened Tuesday. Shares of JPMorgan Chase and Wells Fargo dropped 2 per cent, and Bank of America dropped 3 per cent. The action came after Fitch warned it may have to downgrade credit rating dozens of banks, including JPMorgan Chase. Last week, Moody’s lowered its rating on 10 US banks while putting other big institutions on a watchlist for potential downgrades.

Regional banks also traded lower Tuesday, with the SPDR S&P Regional Banking ETF (KBE) trading down about 3 per cent. Shares fell after Minneapolis Federal Reserve President Neel Kashkari spoke in favour of “significantly further” capital regulation.

Investor sentiment also weakened globally after China reported disappointing economic data and its central bank made a surprise rate cut.

Industrial production in China increased by 3.7 per cent in July from the year-earlier period, missing expectations. Retail sales also grew less than expected, and the People’s Bank of China lowered interest rates by 15 basis points to 2.5 per cent from 2.65 per cent. But that failed to soothe investor concerns and instead only heightened concern about China’s struggling real estate market.

A packed earnings week for the largest retailers kicked into gear Tuesday. Home Depot reported earnings per share and revenue that beat analyst expectations, pushing its stock slightly higher. Later in the week, traders will parse releases from Target and Walmart.

On the data front, July’s US retail sales data came in higher than expected, indicating a stronger-than-expected consumer. Retail sales increased 0.7 per cent on a month-over-month basis. Meanwhile, economists had estimated a 0.4 per cent increase, according to Dow Jones.

In commodity-related news, despite concerns about China's economic growth, iron ore imports are expected to remain stable as prices struggle near $100/metric ton, with import volumes staying above 100M metric tons in August due to potential stimulus measures to support key industries.

BHP's potential interest in Liontown Resources, particularly its Kathleen Valley lithium project located near BHP's Mt Keith project, suggests the possibility of a joint venture to enhance nickel reserves despite BHP's purported disinterest in lithium exposure. Watch this space.

European natural gas futures experienced a second spike within a week due to concerns about potential strikes in Australia that might impact global supply, leading to a 13 per cent increase in the Dutch contract and heightened market tensions, as analysts anticipate a bullish trend if the strikes materialise.

Turning to US sectors, all finished lower overnight. Energy was the worst performing sector, potentially aligning with the weak production output figures coming out of China, whilst Health recorded the fewest losses.

And amidst concerns over the falling rouble due to economic uncertainties following Russia's involvement in Ukraine, the central bank raised its key interest rate by 3.5 percentage points to 12 per cent in an unexpected move, leading to initial strengthening of the currency before some retracement.

Futures

The SPI futures are pointing to a 1 per cent fall.

Currency

One Australian dollar at 7:20 AM was buying 64.53 US cents.

Commodities

Gold shed 0.45 per cent. Silver fell 0.23 per cent. Copper dropped 1.41 per cent. Oil lost 1.84 per cent.

Figures around the globe

European markets closed lower. London’s FTSE fell 1.57 per cent, Frankfurt lost 0.86 per cent, and Paris closed 1.10 per cent lower.

Turning to Asian markets, Tokyo’s Nikkei added 0.56 per cent, Hong Kong’s Hang Seng fell 1.03 per cent while China’s Shanghai Composite closed 0.07 per cent lower.

The Australian sharemarket closed 0.38 per cent higher at 7305.

Ex-dividends

Commonwealth Bank (ASX:CBA) is paying 240 cents fully franked
Dicker Data (ASX:DDR) is paying 10 cents fully franked
Plato Inc Max (ASX:PL8) is paying 0.55 cents fully franked
ResMed Inc (ASX:RMD) is paying 5.1392 cents unfranked

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.

Disclaimer

The views, opinions or recommendations of the commentators in this presentation are solely those of the author and do not in any way reflect the views, opinions, recommendations, of Sequoia Financial Group Limited ABN 90 091 744 884 and its related bodies corporate (“SEQ”). SEQ makes no representation or warranty with respect to the accuracy, completeness or currency of the content. Any prices published are accurate subject to the time of filming and shouldn’t be relied upon to make a financial decision. Commentators may hold positions in stocks mentioned and companies may pay FNN to produce the content at times. The content is for educational purposes only and does not constitute financial advice. Independent advice should be obtained from an Australian Financial Services Licensee before making investment decisions. To the extent permitted by law, SEQ excludes all liability for any loss or damage arising in any way including by way of negligence.
Copyright 2023 – Finance News Network