Chinese data adds fuel to the global equity rally

Encouraging economic data and an enthusiastically received technology IPO helped push the S&P 500 Index and the Dow Jones Industrial Average to their highest closes in over a week on Thursday. Retailers were among the market’s strongest sectors in the wake of stronger-than-expected August retail sales. Energy companies also climbed as crude oil futures extended a rally and topped $90 a barrel for the first time since mid-November. The Dow Jones closed 331 points higher while the S&P 500 and Nasdaq gained 0.8% each. European markets also ended the day higher after a lacklustre morning, with the Euro Stoxx 50 index up 1.3%. 

Summary for 15.09.2023 

• Asian equity markets climbed on Friday, tracking Wall Street higher as investors shrugged off a hotter-than-expected US producer inflation report and cheered Arm Holdings’ successful IPO. Sentiment was also lifted after China cut reserve requirements for all banks to boost the country’s economic recovery and reported upbeat retail sales and industrial production numbers for August. Shares in Australia, Japan, South Korea, Hong Kong and mainland China all advanced.  
• European and US shares are set to extend their rally as investors parse through positive Chinese economic data and expectations of peaking rates globally. 
• The oil market is headed for a third straight week of gains, bolstered by supply constraints from leading oil producers Saudi Arabia and Russia. The West Texas Intermediate crude oil benchmark has demonstrated a consistent upward trend, crossing the $90 per barrel mark on Thursday, a high not observed since November of the previous year. 
• China’s economy picked up steam in August as a summer travel boom and heftier stimulus push boosted consumer spending and factory output, adding to nascent signs of stabilisation. Retail sales increased by 4.6% year-on-year in August, quickening from a 2.5% growth in the prior month and exceeding market estimates of 3.0%. Industrial production grew 4.5% year-on-year in August, accelerating from a 3.7% rise in July and above forecasts of 3.9%.  
• Producer prices in the US increased by 0.7% in August, the highest level since June 2022, and exceeded market expectations of a 0.4% rise. Prices for goods advanced by 2%, driven by a 10.5% surge in energy costs. Meanwhile, prices for services increased by 0.2%, primarily due to rising transportation and warehousing costs. On an annual basis, producer price inflation reached a four-month high of 1.6%, while the core rate eased to 2.2%, marking its lowest level since January 2021. 
• Retail sales in the US advanced 0.6% mom in August, higher than a downwardly revised 0.5% rise in July and beating forecasts of a 0.2% advance. The data continues to point to robust consumer spending despite high prices and borrowing costs. 
• The European Central Bank hiked interest rates for the 10^th consecutive time yesterday and signalled that it is likely done tightening policy, as inflation has started to decline but is still expected to remain too high for too long. Consequently, the main refinancing operations rate reached a 22-year high of 4.5%. According to the September ECB staff macroeconomic projections for the Euro Area, average inflation is forecasted to be at 5.6% in 2023 and 3.2% in 2024, both higher than previous estimates, primarily due to an elevated path for energy prices. The central bank also significantly reduced its GDP growth projections, now anticipating the economy to expand by 0.7% in 2023, 1.0% in 2024, and 1.5% in 2025. 
• Shares in SoftBank’s Arm Holdings soared almost 25% above their Nasdaq debut price on Thursday, rekindling investor hopes for a turnaround in the moribund market for initial public offerings. The share, which had opened at $56.10, notched a 24.68% gain to close at $63.59, giving the British chip designer a valuation of $65 billion in its return to public markets following a seven-year absence. The IPO had priced at $51.  
• Adobe fell 0.25% after the close on Thursday as earnings and forecasts beat expectations. For the third quarter, EPS of $4.09 compared to the average analyst expectation of $3.98 while revenue of $4.89 billion compared to the estimate of $4.87 billion. The company anticipates revenue for the fourth quarter of $4.975 billion to $5.025 billion, compared to the expected $5 billion. EPS should come in at between $4.10 to $4.15 versus the estimate $4.06. 
• Delta Air Lines shares fell about 0.7% on Thursday after the company cut its earnings forecast for the current quarter because of rising costs, a day after American Airlines lowered its profit outlook for similar reasons. 
• First Solar shares rose 3.7% in yesterday’s session after BMO Capital upgraded the share to “outperform” from “market perform,” saying estimates of the company’s long-term financial performance are too low. 
• Norwegian Cruise Line Holdings shares rose 6% after a Redburn analyst upgraded the share to “buy” from “neutral,” citing optimism over growth and margins.