Investors woke up on the wrong side of the bed Friday. Or perhaps they’re just ready to wrap up the month, get the weekend going, and head out on vacation. Either way, a day after driving major European and American indexes to record highs, they’re in a selling mood on July’s final day of trading.
A day after the three big New York markets climbed despite U.S. GDP data that failed to match expectations—the S&P and the Dow both hit intraday records but fell shy of all-time closing highs—futures for all three are down in premarket trading, with the Nasdaq slipping more than 1%.
A good chunk of the tech index’s weakness can be blamed on a hangover from Amazon’ s first earnings miss in three years (revenues came in below Wall Street consensus), which drove down the stock more than 7% after hours before it clawed back a piece in premarket trading.
In Europe, after a day in which bourses were up across the board—and the Stoxx 600 climbed to a fresh record—shares are down too. Even news from the U.K. That weekly COVID cases had dropped by more than a third couldn’t save the day.
Beyond end-of-week exhaustion and Amazon disappointment, investors also have inflation numbers to worry about today.
The initial estimate for eurozone inflation in July came out this morning, and at 2.2%—the highest since October 2018—it overshot the European Central Bank’s 2% for the first time in three years. That comes after investors were already put on edge by Germany’s announcement Thursday that annual inflation rate in July had jumped a higher-than-expected 3.1%, the most since August 2008, and a major labor union’s ensuing demand for “strong wage increases.”
Friday is also inflation day in the U.S., with the morning release of the Fed’s preferred gauge, the personal consumption expenditures price index (PCE).
Asian markets returned to their punishing mindset after taking a breather Thursday. Wrapping up a generally grim week dominated by worries about Beijing’s crackdown on tech and education companies, especially those that want to list in the U.S., investors turned their back on regulators’ attempts to soothe them and drove shares down again.
Despite the drops across the board, it bears noting that July has been a good month for markets in Europe and the U.S. Deutsche Bank Research’s Jim Reid points out that strong corporate earnings and dovishness from Fed Chair Jerome Powell has helped to outweigh negative sentiment from a general rise in COVID cases. In fact, “the impact of more cases on markets has been cushioned by expectations that this will in turn see central banks become more cautious about withdrawing monetary stimulus over the coming months.”
Now let’s see what’s moving markets.
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Asia
Overnight in Asia, sentiments were weakened. The Nikkei lost 1.8%, the Hang Seng dropped 1.4%, the Shanghai Composite slipped 0.4%, and the Kospi fell 1.2%, all losing ground at the end of a month of relatively poor performance for equities in the region.
The yuan recovered modestly from the selloff earlier this week, trading at 6.4624 to the U.S. Dollar—up from its midweek drop to 6.528.
Japan’s biggest brokerage and investment bank Nomura Holdings reported a 66% drop in first-quarter net profit because of the slowdown in trading business and a flagged loss from the Archegos scandal.
The FT notes that Chinese tech stocks listed in the U.S. Will today close their worst month since the global financial crisis, as investors dump shares following the regulatory crackdown in Beijing. The Nasdaq Golden Dragon China index, tracking Chinese tech stocks on the NYSE, has fallen 22% so far in July.
Europe
European stocks opened lower on the back of yesterday’s all-time high with the FTSE 100 down 0.8% in morning trades, while Stoxx Europe 600 is down 0.5%.
Another day, another deluge of earnings results with BNP Paribas,Renault, Air France-KLM, and IAG reporting numbers.
German inflation rose 3.1% in July—the highest it has risen since August 2008—with the larger-than-expected numbers leading trade unions to call for immediate wage rises.
The eurozone’s second-quarter preliminary GDP estimate came out Friday, and at 2% quarter over quarter, and 13.7% annually, it beat expectations.
In the U.K., Delta variant COVID cases have been steadily retreating. As the country nervously watches Boris Johnson’s gamble to open the U.K. Economy, cases declined 37% in the past week—one of the fastest single-week declines ever recorded.
U.S.
Nasdaq 100 Futures fell by 1.27% by 4:30 a.m. ET while those tied to the S&P 500 shed 0.78%. Dow Futures meanwhile fell by 121 points. Notably, Amazon shares fell 6.72% in premarket.
As lockdowns ease, Amazon customers were increasingly “doing things besides shopping,” the e-commerce giant said—posting weaker-than-expected sales for the year’s second quarter. Its online store segment grew 15%, the slowest it has grown since 2019.
The price index was up 6%, vs. The expected 5.4%, as inflation concerns simmer away in the background.
Weekly initial jobless claims fell to 400,000 for the week ending July 24, the Labour Department reported. It was a drop of 24,000 from the previous week but still 15,000 more than expected by economists.
Elsewhere
Gold was steady, trading close to $1,830/ounce.
The dollar is flat too.
Crude is down with Brent falling below $75/barrel.
Bitcoin is down as well, dipping below $40,000.
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