Wall Street Bounces Back: In a remarkable turnaround, Wall Street bounced back on Monday, bolstered by positive earnings reports and promising signs of easing inflation. As a ripple effect, Asian shares mainly recorded gains, while investors eagerly await China’s stimulus measures to bolster its slowing economy.
Adding to the positive sentiment, hopes for Beijing’s further support to counter the economic downturn lifted market spirits. A recent poll indicated a decline in Chinese manufacturing activity for July, attributed to falling export orders, prompting calls for action from the ruling Communist Party.
The purchasing managers’ index (PMI) provided insight into the economic landscape, showing a rise to 49.3 from June’s 49 on a 100-point scale. However, the index remained below the critical 50-point mark, signaling a contraction in economic activity.
Economist Julian Evans-Pritchard from Capital Economics commented on China’s economic recovery, noting that the momentum continued to wane in July. In light of lingering external headwinds, policy assistance is crucial to avert a potential recession and safeguard the nation’s economic stability.
Hong Kong’s Hang Seng led the charge with an impressive 1.5% surge to 20,208.78, while the Shanghai Composite followed suit with a 0.6% rise to 3,296.58. Tokyo’s Nikkei 225 climbed 1.1% to 33,133.39, and Seoul’s Kospi marked a 0.7% gain at 2,626.86.
However, Australia’s S&P/ASX 200 faced a minor setback, falling 0.1% to 7,399.00. On the other hand, Bangkok’s SET exhibited resilience, rising 0.6%. The Indian Sensex maintained a stable position with no significant change.
Meanwhile, back in the U.S., the S&P 500 enjoyed a 1% surge to 4,582.23, concluding its ninth winning week in the last eleven. Notably, Big Tech stocks played a crucial role in driving the Dow and Nasdaq, which gained 0.5% and 1.9%, respectively.
As investors anticipate a potential slowdown in inflation, optimism surrounding the Federal Reserve’s rate hike being the last of this cycle is driving the market’s enthusiasm. The federal funds rate, which started at zero early last year, has gradually risen to 5.25%–5.50%. The moderation of inflation through interest rate adjustments can bolster economic growth and stave off fears of an impending recession.
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Notably, technology stocks, considered prime beneficiaries of softer rates, experienced significant gains and led the market on Friday. Heavyweights like Microsoft, Apple, and Amazon saw their stocks rise by at least 1.4%, playing a pivotal role in driving the S&P 500’s performance.
Encouragingly, spring earnings exceeded expectations, with FactSet reporting that more companies are surpassing profit predictions midway through the earnings season. Tech giant Intel soared by 6.6% after announcing a quarterly profit that defied expert projections.
The optimism spread to other companies as well, with Mondelez International, the maker of Oreo and Ritz, witnessing a notable 3.7% rise after surpassing April’s expectations and revising its full-year earnings outlook.
In the commodities market, U.S. benchmark crude oil slightly fell by 42 cents to $80.16 a barrel in New York Mercantile Exchange electronic trading on Monday, following a 49-cent gain on Friday. Brent crude declined by 47 cents to $83.94 a barrel.
Currency-wise, the dollar strengthened against the yen, reaching 141.87 yen from Friday’s 141.01. The euro, however, experienced a slight dip, falling to $1.1012 from $1.1019.
In conclusion, the stock market continues to showcase resilience and optimism, buoyed by positive indicators from both the U.S. and Asian economies. The stage is set for potential China stimulus measures to boost investor confidence and navigate through the intricacies of global economic challenges.