EU GDP and Industrial Production, US Import/Export Prices, EIA Oil Stockpiles
While markets were mostly unmoved by the consumer price index (CPI) in the US being up at 1.8% y/y vs. 1.7% expected, major moves were seen following news that the US Trade Representative Office in a surprise move removed some items from the tariffs due on Chinese imports from next month, while also postponing the implementation of 10% duty on other items, such as laptops and cell phones until mid-December.
Most markets reacted with a significantly bullish upside with one of the few exceptions being the Indian market, where by Wednesday morning the India 50 index was still flat and only halted further losses for the time being. Investors could be worried about the steep decline of car sales, which fell by staggering 30.9% in July in the deepest drop since the dot-com bubble burst at the beginning of the century.
Cryptocurrency markets were again on the move with Bitcoin falling below $11,000 for the first time in more than a week. The US SEC indicated that it would now announce its decision whether it would approve a Bitcoin ETF around October, which marks another delay.
For Wednesday CPI and PPI data from the UK, followed by EU industrial production and GDP data can be expected. Later that day the US will publish import and export price data followed by crude oil inventory statistics from the EIA.
News of the United States postponing some of its planned tariffs supported the US dollar and in turn pushed the EUR/USD pair close to its one week low. Inflation data from Germany matched expectations at 1.7% increase in the annualized consumer price index (CPI). In the US however inflation marginally surpassed expectations with 1.8% vs. 1.7% expected annual CPI increase.
Some events in Europe could also have added concerns about the strength of the common currency market, with the German ZEW survey on business expectations at -44.1 reaching the lowest level since 2011. While only days earlier the leader of the Italian League Party Matteo Salvini said that leaving the euro was not an option, however some still seemed worried about his election campaign possibly being at odds with the euro stability criteria as he reportedly would seek bigger investments and lower taxes thus widening the already high fiscal deficit.
On Wednesday Germany’s gross domestic product data for the second quarter again disappointed with a flat growth vs. expectations of 0.1% growth. French unemployment however fell from 8.4% to 8.2%.
Hong Kong 50
While the Hong Kong market index managed to recover on Tuesday over the positive sentiment from the announcement that the US would postpone some tariffs on Chinese imports, those gains were practically all gone by Wednesday morning as the protests continued across the city, with protesters again effectively shutting down Hong Kong International airport. As Beijing compares protesters to terrorists and is building up troops across the border in Shenzhen, there are fears of an intervention from the mainland that could severely damage the business environment of this important commercial hub in far-east Asia.
Further downside could also be seen following the release of important fundamentals from China, where factory output growth fell to an 17-years low. Not only that but the previously resilient retail sales growth also was lower than expected at 7.6% y/y.
Oil prices were up for the fourth day in row on Tuesday, showing a strong upside following the announcement from the US to postpone or cancel some of the tariffs on Chinese imports that were due to kick in next month. However later that day a retracement was seen, which could have been attributed to strongly deteriorating manufacturing data from China and also reports of an unexpected rise in crude oil stockpiles in the US.
On Wednesday the Energy Information Administration will publish its weekly data on crude oil, gasoline and distillate inventories.
The announcement that the US would for now postpone or cancel some of its planned tariffs on Chinese imports pushed major stock indices clearly higher on Tuesday, with major index futures flat at the time European markets opened on Wednesday.
Shares especially in the chip sector (US Semiconductors ETF +2.82) showed a sizable upside, making up for all the losses since the yuan devaluation last Monday. With global risk now perceived lower and gold coming down from its new six-year high, much hyped gold mining stocks (Global Gold Miners Long x3 ETF -5.44%) suffered a setback.
Stocks of the cannabis and pharma company Tilray (+7.89%) jumped to a new one-month high just before the earnings release for the second quarter. Those who bought just before the earnings release might however have been too optimistic with the stock giving up almost all gains in after-hours trading, when the results were actually released. While revenue was up at $45.9 million, which represents an increase by 371% over the previous year, losses also widened to $0.36 per share, which is more than double the loss the company sustained in the same quarter of last year.
More quarterly earnings disclosures can be expected this week, when companies like Cisco (Wednesday), Alibaba, Nvidia and Walmart (Thursday) will publish their numbers.
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