Banks drag global equities lower

The S&P 500 Index and Nasdaq Composite briefly touched four-week lows Tuesday after Moody’s lowered its credit ratings on several US regional banks it said faced “growing profitability pressures” from interest rates and their exposure to commercial real estate.  This raised new concerns about small and medium-sized lenders months after a run of closures hit the sector.  Financial and technology shares were among the weakest sectors yesterday, while energy shares were strong as crude oil futures climbed more than 1%.  Meantime, European equity markets were particularly weak, driven lower by the region’s banks, after the Italian government announced a 40% tax on banks’ extra profits this year. 

Summary for 09.08.2023 

• Most Asian shares fell slightly on Wednesday as weak Chinese inflation data drummed up concerns over the region’s biggest economy, while a batch of weak earnings also weighed.  Shares in Japan, Hong Kong and mainland China tumbled, while Australian equities fluctuated around the flatline. 
• European shares are set to recoup some of their recent losses while US futures were muted in the early hours of Wednesday as traders assess earnings.  An active earnings calendar continues today with some 368 US companies expected to report results.  These include Sony Group, Walt Disney and Wynn Resorts. 
• Oil prices continued their advance, holding close to four-month highs as an escalating conflict in Ukraine stoked fears of further supply disruptions.  Ukrainian President Volodymyr Zelensky said his country would retaliate if Russia continued to block Ukrainian ports, driving traders to push up oil prices after an intraday dip during Tuesday’s session. 

• China’s consumer and producer prices both declined in July from a year ago, a sign of deflation pressure that’s likely to be temporary as policymakers face calls to step up monetary and fiscal support.  China is experiencing a rare period of falling prices as consumer and business demand weakens after an initial burst in the first quarter following the ending of pandemic restrictions. 
• Amazon is in talks to join other tech companies as an anchor investor in Arm’s initial public offering, part of preparations for a deal scheduled for next month and expected to raise as much as $10 billion.  Arm, a SoftBank-owned chip designer that counts the world’s biggest tech firms as its clients, has also held discussions with Intel and Nvidia. 
• Italy issued a clarification of its new tax on banks’ windfall profits, saying the impact may be limited for some banks and the levy won’t exceed 0.1% of a firm’s assets.  Banks that have already increased the interest rates they offer to depositors “will not have a significant impact as a consequence of the rule approved yesterday,” the finance ministry said in a statement Tuesday night.  The clarification came about 24 hours after the government shocked markets with the unexpected tax. 
• Beyond Meat shares tumbled 14.5% during yesterday’s session after the plant-based meat company reported quarterly earnings that fell short of expectations. 
• Eli Lilly shares rose nearly 15% Tuesday after its quarterly results topped expectations and the company raised its full-year guidance, thanks to booming sales of its Type 2 diabetes drug Mounjaro, which studies indicate might help with weight loss. 

• Novo Nordisk shares surged more than 17% in yesterday’s session following reports new trial data showed the company’s weight loss drug Wegovy cut the risk of major cardiovascular events by 20%.