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U.S. Stocks Undercut by Taiwan Tensions and Weak Chinese PMI Reports

Barchart - Mon Aug 1, 7:48AM CDT
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Morning Markets

September S&P 500 futures (ESU22) this morning are mildly lower by -0.35%.  U.S. stock indexes are mildly lower on U.S.-China tensions, weak Chinese PMI data, and hawkish Fed comments.

U.S.-Chinese tensions over Taiwan remain high after China’s Foreign Ministry spokesman today said that China’s military “won’t sit idly by” if House Speaker Nancy Pelosi visits Taiwan. The spokesman said, “Her stature as the No. 3 U.S. official means a trip would be highly sensitive.  As to what measures, let’s wait and see whether she insists on the visit.”  The last time a U.S. House Speaker visited Taiwan was a visit by Newt Gingrich in 1997.

Ms. Pelosi is currently on a tour of several Asian countries and has not said whether she will stop in Taiwan.  Taiwan media outlets are reporting that Ms. Pelosi could arrive Tuesday or Wednesday to meet with Taiwanese President Tsai Ing-wen.  Chinese military action could include new incursions by Chinese fighter jets into Taiwan’s air defense identification zone.

China’s July manufacturing PMI, reported on Saturday, fell -1.2 points to 49.0, which was weaker than expectations for a slight +0.1 point increase to 50.3.  China’s July non-manufacturing PMI fell by -0.9 points to 53.8, which was slightly weaker than expectations for a -0.8 point decline to 53.9. Meanwhile, the July Caixin China manufacturing PMI fell -1.3 points to 50.4, which was weaker than expectations for a -0.2 point decline to 51.5.  The weak Chinese PMI reports suggested that China’s recent Covid shutdowns had a larger negative effect on the economy than expected.

The market consensus is for this morning’s (10 am ET) July U.S. ISM manufacturing index to show a -1.0 point decline to 52.0 and for the July prices-paid sub-index to fall -4.2 points to a still very high 74.3.  July new orders are expected to fall -0.2 points to 49.0, remaining below the expansion-contraction level of 50.0.

Stocks this morning were undercut by Minneapolis Fed President Kashkari’s (non-FOMC voter) comment on Sunday that the Fed is committed to doing what is necessary to slow inflation to its 2% target.

Overseas stocks are mostly higher today on carry-over support from last Friday’s rally in U.S. stocks.  The Euro Stoxx 50 today is up +0.57%, adding to last Friday’s +1.53% rally.  The Nikkei index today closed up +0.69%. China’s Shanghai Composite Index today closed up +0.21% despite the weak Chinese PMI reports seen over the weekend.

Pre-Market U.S. Stock Movers

Bitcoin (^BTCUSD) is down -2.5% this morning, falling back after reaching a 1-1/2 month high on Saturday.  Bitcoin rallied by +27% in July on a partial recovery from its epic slump seen earlier this year.  Coinbase (COIN) this morning is down -1.02% in pre-market trading.

Oil stocks may trade lower this morning due to today’s sharp -3.64% sell-off in Sep WTI crude oil futures prices.  Exxon (XOM) is down -1.24% in pre-market trading.

Colgate-Palmolive Co (CL) is up +1% in pre-market trading after Wells Fargo (CL) upgraded the stock to equal-weight from underweight due to its view of an improved earnings outlook.

Comcast (CMCSA) is down -0.48% in pre-market trading after Barclays cut the stock to equal-weight from overweight and said cable companies are “likely past peak growth.”

Sony Group Corp. (SONY) is down -1.63% in pre-market trading after the company cut its earnings outlook amid concerns that weaker global economic growth may hurt consumer spending.

Today’s U.S. Earnings Reports (8/1/2022)

Activision Blizzard Inc (ATVI), Aflac Inc (AFL), Arista Networks Inc (ANET), CF Industries Holdings Inc (CF), DaVita Inc (DVA), Devon Energy Corp (DVN), Diamondback Energy Inc (FANG), Global Payments Inc (GPN), Jacobs Engineering Group Inc (J), Loews Corp (L), Monolithic Power Systems Inc (MPWR), 

Mosaic Co (MOS), ON Semiconductor Corp (ON), SBA Communications Corp (SBAC), Simon Property Group Inc (SPG), Vornado Realty Trust (VNO), Williams Cos Inc (WMB).

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