September S&P 500 futures (ESU23) are down -0.04%, and September Nasdaq 100 E-Mini futures (NQU23) are down -0.05% this morning as weak inflation data from China added to a gloomy global economic outlook while investors looked ahead to the latest U.S. inflation data as well as the start of the second-quarter earnings season.

In Friday’s trading session, Wall Street’s major indexes ended lower, with the blue-chip Dow dropping to a 1-1/2 week low. Levi Strauss (LEVI) plunged over -7% after the company cut its full-year profit forecast. In addition, Costco Wholesale Corp (COST) fell more than -2% after reporting a -1.4% fall in June total company comparable sales. On the positive side, energy stocks advanced as the price of WTI crude rose over +2% to a 1-month high. Regional bank stocks also gained ground, with Zions Bancorp (ZION) climbing more than +4% and Comerica Inc (CMA) gaining over +3%.

The U.S. Labor Department’s report on Friday showed that the U.S. economy added 209K jobs last month, lower than the expected 225K figure and below the 306K recorded in May. At the same time, U.S. June average hourly earnings came in at +0.4% m/m and +4.4% y/y, stronger than expectations of +0.3% m/m and +4.2% y/y, pointing to still-tight labor market conditions. In addition, the U.S. unemployment rate fell to 3.6% in June from 3.7% in May, in line with expectations.

“The jobs report, I think, is consistent with what the Fed would like to see. That’s not to say the mission is accomplished or the job is done. But continued cooling in the jobs market ultimately will make their lives easier” said Josh Jamner, an investment strategy analyst at ClearBridge Investments.

Meanwhile, big banks, including JPMorgan Chase & Co (JPM), Wells Fargo & Company (WFC), and Citigroup (C), kick off the second-quarter earnings season later this week. 

In other news, U.S. Treasury Secretary Janet Yellen acknowledged the possibility of a U.S. recession in an interview on Sunday, noting that it was “appropriate and normal” for growth to moderate and that inflation remains too high.

In the coming week, U.S. CPI data for June will be the main highlight. Also, investors will be eyeing a spate of economic data, including U.S. Core CPI, Crude Oil Inventories, Core PPI, PPI, Initial Jobless Claims, Federal Budget Balance, Export Price Index, Import Price Index, Michigan Consumer Expectations (preliminary), and Michigan Consumer Sentiment (preliminary).

The U.S. economic data slate is mainly empty on Monday. However, investors will likely focus on speeches from San Francisco Fed President Mary Daly, Cleveland Fed President Loretta Mester, and Atlanta Fed President Raphael Bostic for further clues on the outlook for rates.

In the bond markets, United States 10-Year rates are at 4.068%, up +0.52%.

The Euro Stoxx 50 futures are up +0.33% this morning as investors weighed disappointing inflation figures from China which sparked speculation about potential economic stimulus measures. Gains in energy and insurance stocks outweighed losses in miners and retail. Meanwhile, Clare Lombardelli, a chief economist of the Organization for Economic Cooperation and Development, noted the challenging task faced by the European Central Bank in determining the appropriate timing to halt interest rate hikes due to the difficulty in assessing the impact of tightening. In corporate news, shares of Bayer Ag (BAYN.D.DX) rose over +2% following a report that Chief Executive Officer Bill Anderson was exploring the possibility of spinning off the company’s agricultural chemicals business through a stock exchange listing.

Eurozone’s Sentix Investor Confidence Index was released today.

Eurozone July Sentix Investor Confidence Index stood at -22.5, weaker than expectations of -17.9.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed up +0.22%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.61%.

China’s Shanghai Composite today closed slightly higher, giving up most gains as weak Chinese inflation data overshadowed the positive sentiment surrounding improving Sino-U.S. relations and an end to Beijing’s crackdown on internet firms. Data showed on Monday that the country’s factory-gate prices fell at the fastest pace in over 7-1/2 years in June, while consumer inflation was at its slowest since 2021, pointing to a loss of momentum in China’s post-pandemic economic recovery. Meanwhile, Nomura’s Chief China Economist Ting Lu Monday revised down his China inflation forecasts for 2023 and 2024. On the positive side, Hong Kong-listed tech stocks outperformed on Monday, with Alibaba Group climbing over +3% after China fined the company’s affiliate, Ant Group, $984 million for violating laws and regulations, igniting optimism that a years-long regulatory crackdown on the fintech has ended. Also, before leaving China on Sunday, U.S. Treasury Secretary Janet Yellen characterized her 10 hours of meetings with senior Chinese officials over the past few days as “direct” and “productive,” expressing optimism that her visit had advanced efforts to put the relationship on “surer footing.”

The Chinese June CPI stood at -0.2% m/m and 0.0% y/y, weaker than expectations of 0.0% m/m and +0.2% y/y.

The Chinese June PPI came in at -5.4% y/y, weaker than expectations of -5.0% y/y.

At the same time, Japan’s Nikkei 225 Stock Index closed lower today and hit a one-month low. Ministry of Finance data showed Monday that the country’s current account surplus more than doubled year-on-year in May, driven by income gains from its overseas investment and a smaller trade deficit. In a quarterly report, the Bank of Japan said that numerous small and mid-sized companies in Japan have proactively increased wages in response to the growing labor shortage, and it further mentioned that many firms intend to raise prices for their products and services to offset the rising labor expenses. Meanwhile,healthcare stocks fell the most on Monday. Chip-related stocks also underperformed, with Tokyo Electron falling over -1% and Advantest dropping more than -2%. In corporate news, Yaskawa Electic slid over -3% and was the top percentage loser on the Nikkei after reporting disappointing financial results. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 5.47% to 20.26.

The Japanese May Current Account n.s.a. stood at 1.862T, weaker than expectations of 1.885T.

Pre-Market U.S. Stock Movers

Black Diamond Therapeutics Inc (BDTX) surged about +11% in pre-market trading after RA Capital Management acquired 935,850 shares of the company at $5 per share, worth about $4.68M.

Charles Schwab Corp (SCHW) rose more than +1% in pre-market trading after JMP Securities upgraded the stock to Outperform from Market Perform.

Bill Com Holdings Inc (BILL) fell over -2% in pre-market trading after Keefe Bruyette downgraded the stock to Market Perform from Outperform.

Citizens Financial Group Inc (CFG) dropped more than -1% in pre-market trading after Evercore ISI downgraded the stock to In Line from Outperform.

Watsco Inc (WSO) slid over -1% in pre-market trading after KeyBanc downgraded the stock to Sector Weight from Overweight.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Monday - July 10th

Helen of Troy Ltd (HELE), WD-40 (WDFC), PriceSmart (PSMT), Saratoga Investment Corp (SAR), VOXX (VOXX), CalAmp (CAMP).

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