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Weak Chinese Data May Lead To Pullback On Wall Street

The major U.S. index futures are currently pointing to a lower open on Monday, with stocks likely to give back ground following the strong upward move seen last Friday.

Lingering concerns about the global economy may lead to a pullback on Wall Street after the release of weak Chinese industrial output, retail sales and fixed-asset investment data.

A surprise interest rate cut by China's central bank has added to concerns about slowing growth in the world's second largest economy.

Traders may use the economic worries as an opportunity to cash in on last week's strong gains, which lifted the major averages to their best levels in three months.

Potentially adding to the negative sentiment, the New York Federal Reserve released a report unexpectedly showing a substantial contraction in regional manufacturing activity in the month of August.

Following the significant downturn seen over the course of Thursday's session, stocks showed a strong move back the upside during trading on Friday. With the rally on the day, the major averages reached new three-month closing highs.

The major averages saw further upside going into the close, ending the session at their best levels of the day. The Dow jumped 424.38 points or 1.3 percent to 33,761.05, the Nasdaq surged 267.27 points or 2.1 percent to 13,047.19 and the S&P 500 shot up 72.88 points or 1.7 percent to 4,280.15.

For the week, the S&P 500 skyrocketed by 3.3 percent to record its fourth straight weekly gain, while the Nasdaq and the Dow spiked by 3.1 percent and 2.9 percent, respectively.

Stocks continued to benefit from recent upward momentum, which has lifted the major averages well off their June lows to their highest levels in three months.

Optimism that inflation has peaked also contributed to the continued strength on Wall Street following tamer than expected readings on consumer and producer prices.

Adding to the positive sentiment about inflation, the Labor Department released a report showing U.S. import prices fell by more than expected in the month of July.

The Labor Department said import prices slumped by 1.4 percent in July after rising by an upwardly revised 0.3 percent in June. The decrease reflected the first drop in import prices since December 2021.

Economists had expected import prices to decline by 1.0 percent compared to the 0.2 percent uptick originally reported for the previous month.

The report also showed export prices tumbled by 3.3 percent in July after climbing by 0.7 percent in June. Export prices were expected to decrease by 1.1 percent.

Buying interest was also generated in reaction to a report from the University of Michigan showing consumer sentiment in the U.S. has improved by much more than expected in the month of August.

The report showed the consumer sentiment index jumped to 55.1 in August from 51.5 in July. Economists had expected the index to inch up to 52.5.

With the bigger than expected increase, the consumer sentiment index continued to recover after hitting a record low 50.0 in June.

The University of Michigan also said one-year inflation expectations dipped to 5.0 percent in August from 5.2 percent in July, while five-year inflation expectations crept up 3.0 percent from 2.9 percent.

Surveys of Consumers Director Joanne Hsu noted one-year inflation expectations fell to the lowest level since February but were still well above the 4.6 percent reading from a year ago.

Semiconductor stocks extended the recovery from the sell-off seen earlier in the week, driving the Philadelphia Semiconductor Index up by 3 percent.

Substantial strength was also visible among airline stocks, with the NYSE Arca Airline Index soaring by 2.8 percent to a two-month closing high.

Networking stocks also saw considerable strength on the day, resulting in a 2.6 percent jump by the NYSE Arca Networking Index. The index ended the session at its best closing level in well over three months.

Gold, chemical and brokerage stocks also showed strong moves to the upside, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are plunging $4.88 to $87.21 a barrel after tumbling $2.25 to $92.09 a barrel last Friday. Meanwhile, after climbing $8.30 to $1,815.50 an ounce in the previous session, gold futures are falling $18.10 to $1,797.40 an ounce.

On the currency front, the U.S. dollar is trading at 132.72 yen versus the 133.42 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.0198 compared to last Friday's $1.0259.

Asia

Asian stocks ended broadly higher on Monday as investors reacted to economic data from the United States, China and Japan. Positive U.S. economic data released late last week soothed concerns over the world's largest economy.

However, weak Chinese data added to concerns about slowing growth, overshadowing a surprise rate cut by the country's central bank.

Japanese GDP expanded in the three months to June but growth was weaker than market expectations.

China's Shanghai Index fluctuated before ending marginally lower for the day as weak industrial output, retail sales and fixed-asset investment data raised concerns about slowing growth.

Earlier in the day, China's central bank cut both one-year and seven-day lending rates by 10 basis points in a surprise move to revive demand.

Hong Kong's Hang Seng Index ended 0.7 percent lower at 20,040.86 on China slowdown fears.

Japan's Nikkei 225 Index rallied 1.1 percent to finish at 28,871.78 after upbeat earnings by retail firms. The broader Topix ended 0.6 percent higher at 1,984.96.

Government data showed that Japan's GDP grew at an annualized pace of 2.2 percent in the second quarter of this year, coming in below the median estimate of 2.6 percent.

Among the top gainers, Pan Pacific International Holdings jumped 11.5 percent and Sundrug soared 10.8 percent. Daiichi Sankyo climbed 14.5 percent after the pharmaceutical firm won a dispute over a cancer drug technology.

Indian and South Korean markets were closed for holidays.

Australian markets advanced as investors awaited key corporate earnings and the release of the minutes from the Reserve Bank of Australia's August policy meeting due on Tuesday.

The benchmark S&P/ASX 200 Index rose 0.5 percent to 7,064.30, while the broader All Ordinaries Index gained half a percent to end at 7,324.90.

Core Lithium soared almost 10 percent after releasing an update on its exploration activities. Steel producer BlueScope Steel rallied 3.9 percent after its annual profit beat estimates.

Mining heavyweight BHP Group and biotech firm CSL both edged up slightly, while gas producer Santos fell 1.1 percent ahead of their earnings results due this week.

Europe

European stocks have moved lower on Monday, as investors mull disappointing Chinese data and await the minutes of the Federal Reserve's July meeting due on Wednesday for clues on the size of next rate hike.

German wholesale price inflation slowed for the third straight month in July but remained at an elevated level due to higher raw material costs, Destatis reported.

Wholesale prices registered a double-digit annual increase of 19.5 percent in July, but slower than the 21.2 percent increase seen in June.

While the German DAX Index has edged down by 0.1 percent, the French CAC 40 Index is down by 0.3 percent and the U.K.'s FTSE 100 Index is down by 0.4 percent.

Miners Anglo American and Antofagasta have fallen after China's retail sales and industrial output data for July came in below estimates.

Oil & gas company BP Plc and Shell have also moved lower as oil extends Friday's losses on concerns about demand at the world's largest crude importer.

Henkel was little changed after the German consumer goods maker reported weak profit in its first half amid increasing costs.

Meanwhile, AstraZeneca has rallied after the drug maker reported positive trial results of its cancer drug, Enhertu, developed with Japan's Daiichi Sankyo.

Meal kit delivery firm HelloFresh has also jumped after reporting record quarterly revenues.

Energy firm Uniper has also soared ahead of the government's announcement on the size of its gas price levy.

U.S. Economic Reports

New York manufacturing activity has unexpectedly seen a substantial contraction in the month of August, according to a report released by the Federal Reserve Bank of New York on Monday.

The New York Fed said its general business conditions index plummeted to a negative 31.3 in August from a positive 11.1 in July, with a negative reading indicating a contraction in regional manufacturing activity.

Economists had expected the index to show a much more modest decrease to a positive 8.5.

Looking ahead, the New York Fed said firms did not expect much improvement in business conditions over the next six months.

At 10 am ET, the National Association of Home Builders is scheduled to release its report on homebuilder confidence in the month of August. The housing market index is expected to remain unchanged at 55.

Federal Reserve Governor Christopher Waller is due to give opening remarks before the 2022 Summer Workshop on Money, Banking, Payments, and Finance hosted by the Federal Reserve Board of Governors at 10:50 am ET.

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