Uncertain builds for China and Fed news

All three major US indices finished below the flatline on Tuesday, following a big rally last week that saw both the S&P 500 and the Nasdaq Composite having their best weekly performances since March.  The Dow Jones fell more than 240 points, the S&P 500 lost 0.4% and the Nasdaq dipped by 0.1% as investors await comments from several Fed officials this week.  Meanwhile, housing starts and building permits topped forecasts, with the former unexpectedly surging the most since 2016 last month.  In Europe, the Euro Stoxx 50 Index fell for a second consecutive session on Tuesday, down 0.4%. 

Summary for 21.16.2023 

• Asian equities were subdued on Wednesday as a lack of new stimulus steps from China frustrated investors, who were also wondering just how hawkish Federal Reserve Chair Jerome Powell would choose to be later in the session.  Shares in Australia, Hong Kong, and mainland China declined, while Japanese markets rose. 
• European equity futures traded marginally higher while US futures were seen flat this morning as the market cautiously awaits Powell’s testimony before Congress later in the day. 
• Oil prices edged higher this morning after a couple of sessions of losses, still struggling with concerns about Chinese demand as the CNPC, the country’s largest oil and gas producer, cuts in 2023 China crude demand estimate.   

• The European Central Bank has completed most of its interest rate increases, and possible further hikes would be less important in fighting inflation than the duration of tight monetary policy, Bank of France Governor Francois Villeroy de Galhau said yesterday.  The policymaker’s comments add caution to a heated debate at the ECB over the outlook for interest rates, with more hawkish colleagues warning increases may still be needed in the fall. 
• US President Joe Biden referred to Chinese President XI Jinping as a dictator in comments underscoring the tricky balance of managing ties with an assertive global rival while appealing to domestic audiences as he seeks re-election.  Biden’s comments at a Tuesday fundraiser come just a day after Secretary of State Antony Blinken wrapped up his first official visit to Beijing. 
• Housing starts in the US unexpectedly jumped 21.7% month-over-month to a seasonally adjusted annualized rate of 1.631 million in May, the highest level since April of 2022 and way above forecasts of 1.4 million. The reading suggested the housing market is stabilizing after a loss of momentum that started early last year, prompted by elevated mortgage rates, high prices, and tighter lending. 
• Abu Dhabi National Oil Co. Has made a preliminary takeover approach for German chemical producer Covestro, a potential acquisition that would rank as its biggest-ever overseas purchase.  Adnoc discussed a potential offer in the mid-€50s per Covestro share, implying a premium of nearly 40% to its last close and potentially valuing the company at €11 billion.  
• Mastercard on Wednesday launched a global project to recycle credit and debit cards as part of a plan to save the billions of cards in circulation across the industry from landfill.  The company will initially partner with HSBC Holdings plc on a pilot study by providing the latter with shredding machines, each of which is capable of holding 10,000 cards, equivalent to 50 kg of plastic.  Once full, it will be transferred to a plastic recycling facility.  Currently, Mastercard said it has around 3.1 billion cards in circulation.  Each year, it estimates around 600 million cards are produced by the industry, each with a life span of around five years. 

• Chinese electric car company Nio announced yesterday it received $738.5 million in new capital from a fund owned by the Abu Dhabi government. The strategic investment ultimately gives the fund, CYVN Holdings, a 7% stake in Nio.  Earlier this month, the company said lackluster car deliveries was affecting cash flow, and that it was delaying capital expenditure and some research and development projects. 
• China this morning unveiled a package equivalent to $72.3 billion to boost sales of electric vehicles and other green cars over the next four years to prop up softening auto demand, sending shares of automakers sharply higher.   The package, widely expected after an earlier government pledge to promote the industry, comes as softening sales in the world’s biggest auto market have raised concern over economic growth which is losing momentum after a brisk start to the year.