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Beyond the Numbers

Upbeat Chinese Trade Data May Generate Early Buying Interest
8/8/2019 8:53 AM

The major U.S. index futures are pointing to a higher opening on Thursday, with stocks likely to see further upward after recovering from an early sell-off in the previous session.

Early buying interest may be generated in a reaction to a report from the Chinese customs office showing unexpected annual growth in Chinese exports.

The report said Chinese exports in July were up by 3.3 percent compared to the same month a year ago, while economists had expected a 2 percent decrease.

While the report also showed a 5.6 percent year-over-year drop in Chinese imports, that was smaller than the 8.3 percent slump expected by economists.

The data may ease concerns about the impact of the U.S.-China trade dispute even though it reflects a period before the latest escalation in the trade war.

Meanwhile, China’s central bank set the midpoint for the yuan above 7.00 per dollar the first time in a decade, but it was not as weak as many had expected.

Stocks showed a substantial turnaround over the course of the trading session on Wednesday, recovering from an early sell-off to end the day mostly higher. The major averages all climbed into positive territory, although the Dow pulled back below the unchanged line going into the close.

After plunging by nearly 600 points in early trading to hit a two-month intraday low, the Dow showed a significant rebound but still ended the day down 22.45 points or 0.1 percent at 26,007.07.

Meanwhile, the broader Nasdaq and S&P 500 finished the session in positive territory. The tech-heavy Nasdaq climbed 29.56 points or 0.3 percent to 7,862.83 and the S&P 500 inched up 2.21 points or 0.1 percent to 2,883.98.

The early sell-off on Wall Street came as the escalating U.S.-China trade war has investors paying close attention to daily developments on the currency front.

The People's Bank of China set the midpoint for onshore yuan trading at 6.9996 per dollar, slightly stronger than the key 7.00 per dollar level but 0.4 percent weaker than 6.9683 on Tuesday.

The Chinese central bank setting the midpoint for the Chinese currency at a stronger than expected level contributed rally seen on Wall Street on Tuesday.

Negative sentiment was also generated in reaction to disappointing earnings from Disney (DIS), with the entertainment giant slumping by 4.9 percent.

After the close of trading on Tuesday, Disney reported fiscal third quarter results that missed analyst estimates on both the top and bottom lines.

Selling pressure waned shortly after the start of trading, however, inspiring traders to pick up stocks at reduced levels as treasury yields rebounded from an early move to the downside.

Traders were also digesting aggressive interest rate cuts by central banks in India, New Zealand and Thailand amid concerns about the global impact of the U.S.-China trade war.

Citing the overseas rate cuts, President Donald Trump claimed in a series of posts on Twitter that the problem is "not China" but rather a Federal Reserve that is "too proud to admit their mistake of acting too fast and tightening too much (and that I was right!)"

"They must Cut Rates bigger and faster, and stop their ridiculous quantitative tightening NOW," Trump tweeted. "Yield curve is at too wide a margin, and no inflation!"

"Incompetence is a terrible thing to watch, especially when things could be taken care of sooo easily," he added. "We will WIN anyway, but it would be much easier if the Fed understood, which they don't, that we are competing against other countries, all of whom want to do well at our expense!"

Gold stocks showed a significant move to the upside on the day, driving the Philadelphia Gold And Silver Index up by 1.8 percent. With the jump, the index ended the session at its best closing level in well over a year. The rally by gold stocks came amid a sharp increase by the price of the precious metal.

Considerable strength also emerged among chemical stocks, as reflected by the 1.4 percent gain posted by the S&P Chemical Sector Index. The index rebounded after ending the previous session at a two-month closing low.

Housing and commercial real estate stocks also moved higher over the course of the session, while notable weakness remained visible among financial, oil service, and telecom stocks.

Commodity, Currency Markets

Crude oil futures are surging up $1.18 to $52.27 a barrel after plunging $2.54 to $51.09 a barrel on Wednesday. Meanwhile, an ounce of gold is trading at $1,506.30, down $1.30 compared to the previous session’s close of $1,519.60. On Wednesday, gold spiked $35.40.

On the currency front, the U.S. dollar is trading at 106.08 yen compared to the 106.27 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1188 compared to yesterday’s $1.1199.

Asia

Asian stocks rose broadly on Thursday as China reported better-than-expected export growth in July and oil prices reversed half of their nearly 5 percent drop in the previous session on expectations producers may reduce supply to support the market.

China's central bank set the midpoint for the yuan above 7.00 per dollar the first time in a decade, but it was not as weak as many had expected.

Chinese shares halted six straight sessions of losses after data showed the country's exports unexpectedly returned to growth in July despite escalating trade tensions.

Exports rose 3.3 percent in the month, compared to forecasts for a 2 percent drop. On the other hand, imports fell 5.6 percent, less than the expected 8.3 percent decline.

Separately, central bank data showed that China's foreign exchange reserves declined in July as the dollar strengthened against major currencies.

The benchmark Shanghai Composite Index jumped 25.87 points or 0.9 percent to 2,794.55, while Hong Kong's Hang Seng Index climbed 123.74 points or 0.5 percent to 26,120.77.

Japanese shares ended a choppy session modestly higher and the yen's appreciation against the dollar slowed after Japan approved its first shipment of restricted goods to South Korea.

The Nikkei 225 Index ended the session up 76.79 points or 0.4 percent at 20,593.35, while the broader Topix closed marginally lower at 1,498.66.

Technology stocks were in demand, with Advantest rising 3 percent and Tokyo Electron gaining 1.1 percent. On the other hand, oil stocks dropped, with Inpex losing 2.5 percent and Japan Petroleum declining 1.2 percent.

Australian markets recovered from a weak start to close higher after customs data showed China's exports unexpectedly returned to growth in July despite escalating trade tensions.

The benchmark S&P/ASX 200 Index climbed 48.60 points or 0.8 percent to 6,568.10, while the broader All Ordinaries Index ended up 53.80 points or 0.8 percent at 6,642.30.

Banks ended on a mixed note, while troubled wealth manager AMP entered a trading half after announcing a massive capital raising.

Insurance Australia Group plunged 5 percent after reporting a 13 percent drop in insurance profit for the year to June 30.

Energy stocks such as Woodside Petroleum, Oil Search and Santos rose over 1 percent as oil prices rebounded from seven-month lows on news that Saudi Arabia is considering all options to stem an ongoing rout.

BHP shares advanced 1.5 percent after the global miner approved a $283 million investment to fund the development of an oil and gas project in Trinidad and Tobago.

Gold miner Evolution rallied 1.9 percent and Newcrest soared 4.1 percent after gold prices rose overnight.

Meanwhile, power producer AGL Energy slumped 4.6 percent as it projected a lower underlying profit for the next year.

Seoul stocks bounced back after six days of declines as China's exports beat expectations in July and Japan approved exports of a high-tech material to South Korea for the first time since imposing tighter curbs last month.

The Kospi gained 10.90 points or 0.6 percent to finish at 1,920.61. Automakers paced the gainers, with both Hyundai Motor and Kia Motors rising over 2 percent.

Europe

European stocks have risen for the second straight day on Thursday as the yuan steadies after a week of turmoil and China reported unexpectedly strong export numbers for the month of July.

While the French CAC 40 Index has jumped by 1.3 percent, the German DAX Index is up by 0.9 percent and the U.K.’s FTSE 100 Index is up by 0.3 percent.

Zurich Insurance has moved sharply higher after the Swiss insurer said it is on track to surpass the targets it set itself for the full year.

Staffing firm Adecco Group has also advanced after releasing its second-quarter results, while insurer Aviva has gained after reporting a rise in first-half pretax profit.

Hargreaves Lansdown shares have soared after the financial services company reported a rise in full-year pre-tax profit on the back of higher revenue.

On the other hand, Savills has fallen after the real estate services provider reported a drop in interim profit amid Brexit uncertainty and political unrest in Hong Kong.

Housebuilder Bellway has also tumbled after saying that annual pre-tax profits will likely meet market expectations.

Osram has also slumped after Allianz Global Investors, the biggest shareholder in the lighting group, rejected a 3.4 billion euro ($3.81 billion) takeover offer from private equity firm Bain and Carlyle.

U.S. Economic Reports

First-time claims for U.S. unemployment benefits unexpectedly showed a modest decrease in the week ended August 3rd, according to a report released by the Labor Department.

The report said initial jobless claims dipped to 209,000, a decrease of 8,000 from the previous week's revised level of 217,000. Economists had expected jobless claims to come in unchanged compared to the 215,000 originally reported for the previous week.

Meanwhile, the Labor Department said the less volatile four-week moving average crept up to 212,250, an increase of 250 from the previous week's revised average of 212,000.

At 10 am ET, the Commerce Department is due to release its report on wholesale inventories in the month of June. Wholesale inventories are expected to rise by 0.2 percent.

The Treasury Department is scheduled to release the results of its auction of $19 billion worth of thirty-year bonds at 1 pm ET.

Stocks In Focus

Shares of Symantec (SYMC) are moving sharply higher in pre-market trading after a report from the Wall Street Journal said the cybersecurity company is near a deal to sell its enterprise business to Broadcom (AVGO).

Chipmaker Advanced Micro Devices (AMD) is also seeing significant pre-market strength after launching its second generation server chip with Google and Twitter as customers.

On the other hand, shares of Party City (PRTY) are likely to come under pressure after the party supplies retailer reported weaker than expected second quarter results and provided disappointing guidance.

Travel website operator TripAdvisor (TRIP) may also move to the downside after reporting second quarter results that missed analyst estimates.
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