Weak Chinese GDP raises urgency for more policy support 

US equities ended last week on a soft note, but the S&P 500 Index and Nasdaq Composite were still near 15-month highs thanks to slowing inflation and better-than-expected quarterly earnings from a few large banks.  Top banks JPMorgan Chase, Citigroup, and Wells Fargo reported results that mostly surpassed Wall Street expectations, with JPMorgan CEO Jamie Dimon sounding optimistic notes about the economy.  Energy shares were among the weakest performers Friday after crude oil futures retreated nearly 2%, from 2 ½ month highs posted Thursday.  Regional banks were also lower while health care and consumer staples were among the strongest performers.  The US dollar gained slightly but remained near a 17-month low against the euro.  Elsewhere, European shares ended mix on Friday, with the Euro Stoxx 50 Index up 0.2%, extending the gain for the week to 4.3%. 

Summary for 17.07.2023 

• Most Asian shares moved in a flat-to-low range on Monday, while Chinese markets fell sharply after data showed that economic growth in the country slowed substantially through the second quarter.  Regional trading volumes were somewhat slim, on account of a market holiday in Japan and a trading halt in Hong Kong, as the city faces its first major typhoon this year.   
• European shares are poised to decline on concern that more interest-rate hikes are needed to quell inflation.  US futures are also indicated lower as caution dominated sentiment ahead of a busy week for corporate earnings.  
• Oil prices were lower this morning, retreating further from recent highs as data showed that an economic recovery in China slowed substantially in the second quarter.  Moreover, there were reports that two of the three Libyan oil fields shut last week resumed production on Saturday evening, bringing a total output capacity of 370,000 barrels per day back to the market. 

• China’s economy grew slower than expected in the second quarter, with worrying signs of slowdown in consumer spending and ongoing pain in the property market, prompting calls for Beijing to do more to support the recovery.  GDP expanded 6.3% in the second quarter from a year prior, data released by the National Bureau of Statistics showed Monday, weaker than the median forecast of 7.1%.  Monthly indicators for June showed a mixed picture, with a notable slide in retail growth and a weakening in the property market, while industrial production improved. 
• The University of Michigan consumer sentiment for the US increased for a second month to 72.6 in July, the highest level since September 2021, and well above forecasts of 65.5, preliminary estimates showed.  Both current economic conditions and consumer expectations improved, largely attributable to the continued slowdown in inflation along with stability in labour markets. 
• Citigroup fell nearly 4% on Friday despite reporting second-quarter earnings and revenue that surpassed analysts’ expectations.  Citi’s revenue fell 1% from the same quarter in 2022, to $19.4 billion, in part because of a weaker investment banking business. 
• JPMorgan Chase shares rose 0.5% after reporting stronger-than-expected earnings of $4.37 per share for the second quarter, along with revenue to $42.4 billion, up 40% from a year earlier.  The big bank benefited from solid loan growth, trading, and net-interest income. 
• Wells Fargo shares reversed earlier gains and fell 0.4% despite reporting diluted earnings of $1.25 per share, slightly better than expectations. 

• United Health rose 7.3% in Friday’s session after reporting stronger-than-expected quarterly results and raising its 2023 outlook. 
• Eli Lilly shares rose 3.5% Friday after the pharmaceutical company said it plans to acquire privately held obesity drug maker Versanis for $1.9 billion. 
• Over the course of this week, investors will focus on the earnings results from major US companies, such as Bank of America, Morgan Stanley, Goldman Sachs, IBM, Netflix, Tesla, and Johnson & Johnson.  Additionally, it will be interesting to monitor retail sales, industrial production, and housing data.  Markets will also be attentive to inflation rates in the UK, Canada, Japan, and New Zealand.  Furthermore, the central bank of Turkey will make its decision regarding monetary policy, Australia will publish the unemployment rate, and the UK and Canada will release retail sales data.