Markets today: stocks climb following favorable news from China and the ECB

Morning markets

September E-Mini S&P 500 futures (ESU23) are up +0.31% this morning and September E-Mini Nasdaq 100 futures (NQU23) are up +0.22%.

Stock index futures are slightly higher this morning. Stocks found support today after China cut bank reserve requirements by -25bps to 10.50%. Stocks are also getting support from gains in European stocks after the ECB raised interest rates by 25bps today, but signaled it was on hold for now.

However, stock index futures fell from their best levels after stronger-than-expected U.S. economic news today strengthened the case for the Fed to hold interest rates longer .

In the US, weekly initial jobless claims rose +3,000 to 220,000, showing a stronger job market than expectations of 225,000.

The PPI of final demand in the United States in August accelerated to +1.6% year-on-year from +0.8% year-on-year in July, the highest in 4 months and slightly above expectations. +1.3% over one year. However, the August PPI excluding food and energy fell to +2.2% year-on-year from +2.4% year-on-year in July, exactly as expected and with the smallest increase in 2 and a half years.

U.S. retail sales in August rose +0.6% m/m, stronger than expectations of +0.1% m/m. August retail sales excluding automobiles rose +0.6% m/m, stronger than expectations of +0.4% m/m.

Markets are pricing in a 2% chance of a +25bp rate hike at the September 20 FOMC meeting and a 42% chance of a +25bp rate hike at the November 1 FOMC meeting.

Global bond yields are mixed. The yield on the 10-year T-note is down -1.0 bps to 4.239%. The 10-year German Bund yield is down -6.7 bps to 2.584%. The UK 10-year gilt yield fell to a 1.5-month low of 4.277% and is down -6.4bps at 4.283%.

Foreign stock markets are rising. The Euro Stoxx 50 is up +0.37%. China’s Shanghai Composite Index closed up 0.11%. Japan’s Nikkei stock index closed up 1.41%.

The Euro Stoxx 50 is moderately higher today. Strength in mining stocks is leading the overall market higher after iron ore prices hit a 5-month high and copper prices hit a 1-week high. Gains are limited by weakness in European automakers, which fell after China criticized the European Union’s investigation into Chinese subsidies for electric vehicles. China’s state-sponsored Global Times newspaper said in a commentary today that Europe’s economy could suffer if protectionist measures are used to suppress China’s electric vehicle industry and suggested retaliatory measures could be taken.

European stocks extended gains after government bond yields fell when the ECB raised its main refinancing rate by 25bps to 4.50%, but signaled plans to pause its rate hike cycle.

The ECB raised its main refinancing rate by 25 basis points, from 4.25% to 4.50%, but said the new level of restriction would make a “substantial contribution” to containing the inflation. The ECB also signaled its intention to remain unchanged for now, saying: “Based on its current assessment, the Governing Council considers that the ECB’s key interest rates have reached levels which, if maintained for a sufficiently long duration, will make a substantial contribution to growth. the rapid return of inflation to the target.

The ECB lowered its 2023 eurozone GDP forecast to +0.7% from a previous forecast of +0.9% and raised its 2023 inflation forecast to +5.6% from a previous forecast +5.4%.

China’s Shanghai Composite Index closed slightly higher. Strong stocks of steelmakers and mining companies led the broader market higher after iron ore prices hit a 5-month high. However, weak property values ​​limited gains across the broader market after Moody’s Investors Service revised the outlook for China’s real estate sector from stable to negative, saying weaker economic growth prospects and lingering buyer concerns house regarding the delivery of projects would slow down property sales. Also, Chinese electric vehicle makers fell for a second day of sales after the European Union announced it was opening an investigation into Chinese subsidies for electric vehicles.

After the close of trading in China today, the People’s Bank of China (PBOC) reduced the reserve requirement ratio by -25 basis points, from 10.75% to 10.50% for most banks. Reducing the ratio frees up liquidity for banks, allowing them to make more loans to businesses and consumers.

Japan’s Nikkei stock index closed slightly higher. Japanese stocks rose today, led by strength in technology stocks after Thursday’s US CPI report for August came in close to expectations and strengthened prospects of a Fed pause in its interest rate increases. Japanese life insurance companies rallied today after Daiwa Securities upgraded the sector from neutral to positive. Additionally, Japanese energy producers rose after crude oil prices hit their highest level in nearly 10 months. On the negative side, today’s economic news showed that core machinery orders in July fell more than expected.

Japanese industrial production for July was revised upwards by +0.2 to -1.8% m/m from the -2.0% m/m initially announced.

Japan’s July core machinery orders fell -1.1% m/m and -13.0% y/y, weaker than expectations of -0.8% m/m and -10.3 % y/y, with the -13.0% decline being the largest year-over-year. year down in almost three years.

Premarket U.S. Stock Movements

Cruise line operators are making progress in pre-market trading after Redburn Atlantic upgraded Carnival and Norwegian Cruise Line Holdings Ltd to buy from neutral. As a result, Norwegian Cruise Line Holdings Ltd (NCLH) is up over +2%, and Carnival (CCL) and Royal Caribbean Cruises Ltd (RCL) are up over +1%.

MetLife (MET) rose more than -1% in pre-market trading after Jeffries upgraded the stock to Buy with a $72 price target.

Etsy (ETSY) soared over +3% in pre-market trading after Wolfe Research upgraded the stock to outperform versus its peers with a $100 price target.

Yum China Holdings (YUMC) jumped over +4% in pre-market trading after reporting high double-digit sales growth over the next three years and setting a target for new store openings of between 1,400 and 1,600 this year. year, up from previous forecasts of 1,100 to 1,300

Visa (V) fell more than 1% in premarket trading after taking steps to allow the largest U.S. banks to forward sell their shares in the company and modify a share structure implemented before the Visa’s IPO in 2008.

HP Inc (HPQ) fell more than 1% in pre-market trading after Warren Buffet’s Berkshire Hathaway revealed it sold $158.5 million worth of its stake in HP.

Semtech (SMTC) fell more than -5% in pre-market trading after forecasting third-quarter net revenue of $190-$210 million, well below the consensus of $247.6 million.

Vital Energy (VTLE) fell more than -6% in pre-market trading after announcing the signing of three deals for Permian Basin assets for a total transaction amount of approximately $1.7 billion.

RTX Corp (RTX) slipped more than -1% in pre-market trading after Bank of America downgraded the stock to Underperform from neutral.

Income Reports (09/14/2023)

Adobe Inc (ADBE), Copart Inc (CPRT), eGain Corp (EGAN), Ispire Technology Inc (ISPR), Lennar Corp (LEN), Mitek Systems Inc (MITK), Urban One Inc (UONEK), Veradigm Inc (MDRX) .

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As of the date of publication, Rich Asplund did not hold (either directly or indirectly) any positions in any of the securities mentioned in this article. All information and data contained in this article are for informational purposes only. For more information, please see Barchart’s disclosure policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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