Equity markets tense as China gloom builds

Wall Street’s major indices ended sharply in the red on Tuesday after stronger-than-expected retail sales data showed continued consumer resilience in the US that could keep interest rates higher for longer, while US big banks dragged following a report that Fitch could downgrade some lenders.  The Dow finished 361 points lower while the S&P 500 and the Nasdaq shed 1.1%.  Besides July’s upbeat Retail sales, a prevailing negative sentiment triggered by Chinese data, along with a reduction in one of the key rates by the PBOC, weighed on the mood.  Meantime, European shares also fell yesterday, with the Euro Stoxx 50 Index down 1%, led by banks and utilities. 

Summary for 16.08.2023 

• Asian equity markets fell on Wednesday as more signs of worsening economic conditions in China, coupled with renewed fears of a hawkish US Federal Reserve sapped appetite for risk-heavy assets.  Shares in Australia, Japan, South Korea, Hong Kong and mainland China all declined. 
• Vietnamese electric vehicle (EV) maker VinFast’s stock market valuation has soared above Ford and General Motors (GM) on its first day of trading. 
• European equity futures nudged lower on worries over China’s economy and the outlook for Fed rates.  Elsewhere US futures were steady this morning. 

• Oil prices crept lower in Asian trade this morning, shrugging off signs of a bigger-than-expected draw in US inventories as concerns over worsening Chinese economic conditions and rising interest rates weighed.  Crude prices fell sharply from 2023 highs in recent sessions as weak economic indicators from top importer China continued to pour in, while signs of a potential resurgence in US inflation boosted the dollar. 
• China’s new home prices fell in June for the first time this year adding to an alarming picture of the world’s second-largest economy from a sector that has become a persistent source of trouble.  Average new home prices in China’s 70 major cities fell 0.1% year-on-year in July after edging up 0.1% in the previous month. 
• The inflation rate in the UK decreased to 6.8% in July from 7.9% in June, data showed this morning. 
• Retail sales in the US were up 0.7% month-over-month in July, marking a fourth consecutive rise, and beating market forecasts of a 0.4% increase.  It follows an upwardly revised 0.3% gain in Uune, in another sign consumer spending remains strong despite high prices and borrowing costs.  Sales in July likely got a boost from Amazon’s Prime Day. 
• Home Depot shares rose about 0.8% on Tuesday after the company reported better-than-expected earnings and CEO Ted Decker expressed optimism over the company’s outlook.  While Home Depot noted pressure in certain big-ticket and discretionary categories, the company added that it remains very positive on the medium-to-long-term outlook for home improvement and its ability to grow its share in a large and fragmented market.  

• D.R. Horton rose nearly 3% yesterday and Lennar shares rose nearly 2% after a regulatory filing showed Warren Buffett’s Berkshire Hathaway had invested a combined $800 million in the two homebuilders during the second quarter. 
• Nvidia shares rose 0.4% during yesterday’s session after UBS< Wells Fargo, and Baird all raised forecasts for the artificial intelligence company’s equity price.