Marketmind: World markets bounce at last
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[August 22, 2023] A
look at the day ahead in U.S. and global markets from Mike Dolan
After a stifling August so far, world markets caught some relief on
Tuesday as this month's bond squeeze eased a bit - with investors now
awaiting signals from Wyoming and distracted by hopes of a reprise of
the early-year AI craze.
There was little to trigger the bounce, other than U.S. 10-year Treasury
yields being dragged back from 16-year highs of 4.36% ahead of
Thursday's annual Federal Reserve conference in Jackson Hole - at which
some indications of longer-term Fed policy thinking is eyed.
No news proved good news in China - where the relentless stream of
negativity around the country's spluttering economy and ailing property
sector seemed to dry up as President Xi Jinping attended the BRICS
summit in South Africa. The onshore yuan steadied amid supportive action
by China's state banks in the swaps market, and Chinese stocks perked up
from the year's lows.
But the global rebound was first seeded on Wall St on Monday as tech
stocks got a lift ahead of chip giant Nvidia's quarterly results on
Wednesday, with hopes of some refocus on the artificial intelligence
boom that's already lifted Nvidia's stock 220% for the year to date. The
Nasdaq 100 clocked its first gain in a week, adding 1.6% for its biggest
rise of the month, and the S&P500 also notched its first advance in
five.
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Overall, MSCI's all-country index was on course on Tuesday for its first
back-to-back daily gains of August so far. And S&P futures were up ahead
of the bell.
Even though Treasury yields hit new cycle highs in Asia trading, there
was some demand at those levels as investors await the Jackson Hole
event and Fed Chair Jerome Powell's keynote speech there on Friday. The
dollar eased back in line with the retreat in yields too.
Futures markets are now see a 50-50 chance of another Fed hike next
month given the recent strength of the economy - but the focus this week
may well be on how long rates stay at these levels and whether estimates
of long-term sustainable interest rates have risen.
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Traders work on the floor of the New
York Stock Exchange (NYSE) in New York City, U.S., August 15, 2023.
REUTERS/Brendan McDermid/File Photo
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There were background concerns about the impact on U.S. banks of
this latest hit to bond prices and borrowing rates.
Credit-rating firm S&P Global late on Monday cut ratings and revised
its outlook for multiple mid-tier U.S. banks, following a similar
move by Moody's, and warned funding risks and weaker profitability
will likely test the sector's credit strength.
And U.S. government spending curbs were also set to come back into
focus in Congress next month, with the outside chance of a
government shutdown as Republican factions push for more cuts beyond
what was agreed to raise the debt ceiling in May.
Elsewhere, investors were enthralled by plans by SoftBank's chip
designer Arm for the biggest initial public offering of the year -
even after reporting 1% fall in annual revenue.
And "Call of Duty" maker Activision will sell its non-European
streaming rights to Ubisoft Entertainment to get the biggest deal
yet in video-gaming past British regulators, potential owner
Microsoft said on Tuesday.
Events to watch for on Tuesday:
* U.S. July existing home sales, Richmond Fed August business
survey, Philadelphia Fed service sector survey
* Richmond Federal Reserve President Thomas Barkin, Chicago Fed
President Austan Goolsbee, Fed board governor Michelle Bowman
* U.S. corporate earnings: Lowe's, Medtronic
* BRICS Summit in Johannesburg. China's President Xi Jinping meets
SAfrican President Cyril Ramaphosa in Pretoria beforehand
(By Mike Dolan, editing by Christina Fincher, mike.dolan@thomsonreuters.com.
Twitter: @reutersMikeD)
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