Monday August 15th


Stock futures fall on slowing China economy concern, following 4 straight weeks of S&P gains

U.S. stock index futures were lower Monday, putting Wall Street on track to take a breather after another positive week, as traders braced for big retail earnings. Futures tied to the Dow Jones Industrial Average fell 199 points, or 0.59%. S&P 500 futures and Nasdaq 100 futures dipped 0.6% and 0.38%, respectively. Monday’s moves come after disappointing economic data out of China overnight. The country’s central bank also cut rates unexpectedly, raising concern over China’s economic recovery. “The clouds of recession are gathering globally. The Chinese economy contracted in 2Q. The US notched a “technical recession.” The flow of natural gas to Western Europe is restricted. In the past three months, we have revised down our forecast for global growth to 2.5%Y in 2022, which is about 50bp below consensus and 40bp lower than in May. We are edging closer to the bear scenario from our May Mid-year Outlook,” wrote Morgan Stanley’s Seth Carpenter in a note to clients Sunday. Last week the S&P 500 advanced 3.25% to notch its fourth positive week in a row and its longest winning streak since 2021. The Nasdaq Composite ended the week 3.08% higher, also for its fourth straight week. The Dow added 2.9%.  The gains came after economic data showed inflation pressures could be easing a bit. The consumer price index was flat from June to July, the producer price index showed a surprise decline and import prices fell more than expected. That helped relax investors that have been eager to call the mid-June lows the bottom of the cycle. Just as many have been quick to call out that the data from one month doesn’t necessarily make it a reliable trend. Investors are looking ahead to a week of earnings from big retailers including Home Depot, Walmart and Target, and listening for clues on how their businesses have been affected by inflation and other macro challenges in the most recent quarter. Retail sales data is also scheduled to be released this week. Shares in the Asia-Pacific were mostly higher on Monday as investors monitored market reaction to Chinese economic data. Mainland China markets were mixed. The Shanghai Composite fell slightly to end the day at 3,276.09 and the Shenzhen Component was up 0.33% at 12,460.22. Hong Kong’s Hang Seng index was 0.72% lower in the final hour of trade. Japan’s Nikkei 225 increased 1.14% to 28,871.78 while the Topix index added 0.6% to 1,984.96 after the country reported an expansion in GDP. India and South Korea markets are closed for a holiday Monday. Oil prices fell by more than $3 a barrel on Monday on concerns over demand in China, the world’s largest crude importer, and ahead of Iran’s response to a nuclear deal proposal which could raise the country’s oil exports. Brent crude futures fell $3.49, or 3.56%, to $94.66 a barrel after settling 1.5% lower on Friday. U.S. West Texas Intermediate crude was down $3.32, or 3.61% at $88.77, after a 2.4% drop in the previous session. Gold prices slid 1% on Monday as the dollar strengthened and as investors turned cautious in the run-up to minutes of the previous U.S. Federal Reserve policy meeting amid hawkish comments from the central bank officials. Spot gold was down 1.47% at $1,775.204 per ounce, after rising about 1.6% last week. U.S. gold futures dropped 1.4% to $1,790.30.