Equity markets set for mixed open ahead of busy earnings day

The S&P 500 Index, Nasdaq, and Dow Jones Industrial Average all climbed to 15-month highs Monday as investors awaited a host of major company earnings while maintaining confidence the Federal Reserve is nearly done raising interest rates.  Technology shares were among the strongest performers yesterday, while smaller companies also performed well, with the small-cap-focused Russell 2000 up over 1% to end at a five-month high.  Financial shares remained robust following mostly better-than-expected results from big banks last week.  In Europe, shares ended in the red, with the Euro Stoxx 50 Index down almost 1%, dragged by household goods shares.   

Summary for 18.07.2023 

• Most Asian equities moved in a flat-to-low range on Tuesday amid persistent concerns over slowing economic growth in China, while Indian shares eyed a new high on the back of a positive earnings season.  The Reserve Bank of Australia also said in its latest minutes that it kept rates steady in July amid economic risks, while warning that further tightening may be needed.  Shares in Australia, South Korea, Hong Kong and mainland China declined, while Japanese equities advanced. 
• European equities are seen opening flat as China’s slow economic recovery spurred growth forecast cuts and a warning from US Treasury Secretary Janet Yellen of potential global impacts.  Meantime, US equity futures eased on Tuesday as investors cautiously awaited more corporate earnings reports from the likes of Bank of America, Morgan Stanley and Lockheed Martin. 
• Oil prices reversed some of the losses of the previous day this morning amid signs of tightening US oil supplies, with data from the Energy Information Administration showing US shale oil production is expected to drop to nearly 9.4 million barrels per day in August, the first such decline since December. 

• The Reserve Bank of Australia considered raising the cash rate by 25bps to 4.35% before deciding to keep it unchanged at 4.1% and realised that both sets of arguments were strong, minutes of the July 4 policy meeting showed.  The board viewed that inflation in Australia had eased from its peak but remained too high.  The committee agreed to reassess the situation in August as it waits for more data on inflation, the global economy, the labour market and household spending, as well as an updated set of staff forecasts and a revised assessment of the risks.  
• More than half of Britons would vote to rejoin the European Union for the first time since the nation opted to leave the bloc seven years ago, YouGov polling showed.  Some 51% of Britons told the polling company that they would vote for the UK to become an EU member again, while 32% said they’d stay out, according to the survey conducted last week.  The proportion in favour of rejoining has risen 11 points since January 2021, when Brexit formally took place.   
• Novartis on Tuesday raised its full-year earnings guidance on strong drug sales and mapped out the planned spin-off and equity market debut of its generic medicines division Sandoz for early in the fourth quarter.  In a statement, the company said it expected group core operating income to grow by a low double-digit percentage in 2023, up from the high single-digit growth previously projected. 
• Tesla shares started the week on a high, with a 3% gain, after the company started production on its long-awaited Cybertruck. 
• AT&T shares fell nearly 7% Monday after the equity was downgraded to “neutral” from “buy” by Citi, which cited uncertainty related to the company’s historical use of lead-sheathed cables, which could be a financial risk.  

• State Street shares fell over 2% yesterday after analysts downgraded the company.  Last Friday, the asset manager reported a drop of about 10% in net interest income from the first quarter. 
• Shares in Compagnie Financiere Richemont tumbled by over 10% yesterday after the company posted sales figures that were slightly below expectations.  Analysts at Citi said in a note that the miss to consensus was entirely due to the US turning negative.  Japan, on the other hand, continued to surprise positively and Asia and Europe were pretty much in line with expectations.