Asia, Europe and US Closing Markets Report | August 1rst, 2022:
China markets rise after private survey shows Chinese factory activity grew; HSBC shares up 5%
SINGAPORE — Mainland China stocks rose along with most other Asia-Pacific indexes on Monday as a private survey on Chinese factory activity showed slight growth. HSBC shares popped after it released its interim results for the second quarter of 2022.
China's Caixin/Markit manufacturing Purchasing Managers' Index for July stood at 50.4, compared with the 51.5 predicted in a Reuters poll. In June, the reading was 51.7.
Still, the reading was better than China's official Purchasing Managers' Index data released over the weekend, which showed a contraction in factory activity.
The contraction in China's official manufacturing PMI … underscores the extent of the uncertainty around growth stemming from a rise in Covid cases, slowing global demand and property market risks.
Economist, Mizuho Bank
PMI readings are sequential and represent month-on-month expansion or contraction. The 50 mark separates growth from decline.
"The contraction in China's official manufacturing PMI to 49.0 in July from 50.2 in June underscores the extent of the uncertainty around growth stemming from a rise in Covid cases, slowing global demand and property market risks," Venkateswaran Lavanya, an economist at Mizuho Bank, wrote in a Monday note.
"The poor start to Q3 further amplifies the risk that China will miss its 2022 GDP growth target of 'around 5.5%.' This against a backdrop of the authorities signaling last week that no big stimulus would be forthcoming even as the country sticks to its 'dynamic zero-Covid' policy," Lavanya wrote.
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On Friday in the U.S., Alibaba was added to a list of companies at risk of delisting under the Holding Foreign Companies Accountable Act. U.S.-listed shares plunged 11% in the regular trading session.
"Alibaba will continue to monitor market developments, comply with applicable laws and regulations and strive to maintain its listing status on both the NYSE and the Hong Kong Stock Exchange," the company said in a statement Monday.
HSBC announced a drop in pre-tax profit to $9.2 billion for the first half of 2022 on Monday, the company said in its interim results media release. That's a $1.7 billion decrease, the bank said.
But it raised its expected return on tangible equity to 12% from 2023, compared with the 10% target in February. Chief Executive Noel Quinn also said the bank plans to revert to quarterly dividends next year and aims to restore the dividend to pre-Covid levels as soon as possible.
Hong Kong-listed shares of HSBC closed 4.96% higher.
Japan's Nikkei 225 gained 0.69% to close at 27,993.35 and the Topix index advanced 1.02% to 1,960.11.
In Australia, the S&P/ASX 200 was 0.69% higher at 6,993.
The Kospi in South Korea was mildly higher at 2,452.25 and the Kosdaq gained 0.5% to 807.61.
MSCI's broadest index of Asia-Pacific shares outside of Japan was 0.21% higher.
The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 105.719, lower than last week's levels.
European stocks close slightly lower to start August; Pearson up 13%
LONDON — European stocks closed slightly lower to begin the new month, with investors digesting a fresh round of corporate earnings.
The pan-European Stoxx 600 slipped 0.2% below the flatline, with oil and gas shares losing 1.6% to lead the losses while banks rose 0.9%.
The negative trade for European stocks comes after the region's markets closed the month of July higher on Friday, and logged their best month since November 2020.
Investors digested a fresh swathe of corporate earnings and key economic data out of the euro zone last week, with data released last Friday showing economic growth in the euro zone accelerated in the second quarter, despite the escalating gas crisis and record-high inflation.
The 19-member bloc posted a 0.7% rise in gross domestic product, exceeding expectations for growth of 0.2% and contrasting sharply with the negative annualized readings out of the United States in the first and second quarter.
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Stateside, U.S. stocks rose following Wall Street's best month since 2020 as investors looked ahead to another week of key earnings reports and economic data, particularly Friday's nonfarm payrolls report from the Bureau of Labor Statistics, which will give more insight into the strong labor market.
So far this year, the solid growth of jobs has prompted economists to say the U.S. is currently not in a recession, even with two consecutive quarters of negative GDP.
In Asia-Pacific markets, mainland China stocks rose along with most other regional indexes on Monday as a private survey on Chinese factory activity showed slight growth.
Earnings on Monday came from HSBC, Pearson, Heineken and Erste Group.
At the bottom of the European blue chip index, British instrumentation firm Spectris slumped almost 6% after posting a slide in first-half profit.
On the data front, euro zone manufacturing activity contracted in July, S&P Global's final manufacturing PMI (purchasing managers' index) revealed on Monday, deepening fears that the bloc could be sliding into recession.
— CNBC's Carmen Reinicke and Abigail Ng contributed to this market report.
Wall Street slips, crude slides as weak data feed recession jitters
All three major U.S. indexes were last modestly lower on the first day of August, coming on the heels of the S&P 500's and the Nasdaq's biggest monthly percentage gains since 2020.
"It seems like a day of rest, a breathing day," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. "It's the first day of a new month and the markets did great in July."
"There's little conviction in either direction right now."
The Institute for Supply Management's (ISM) purchasing managers' index (PMI) showed U.S. factory activity decelerated in July to its lowest level since August 2020, but remained in expansion territory and long-running supply restraints appeared to be easing. read more
The report follows a swath of data from Europe and Asia that showed factory activity slowing or contracting in the face of dampened global demand and persistent inflation. read more
"Whether we’re in technical recession or not, we’re seeing global softening," Tuz said, adding that "there seems to be light at the end of the inflation tunnel."
The Dow Jones Industrial Average (.DJI) fell 63.95 points, or 0.19%, to 32,781.18, the S&P 500 (.SPX) lost 14.53 points, or 0.35%, to 4,115.76 and the Nasdaq Composite (.IXIC) dropped 25.85 points, or 0.21%, to 12,364.84.
Energy stocks pulled European stocks into the red as fears of weakening demand and economic contraction on the heels of disappointing data from the euro zone and China. read more
Crude prices headed lower as global factory data weighed on the demand outlook, and as market participants braced for this week's meeting of OPEC and other oil producers concerning world crude supply. read more
U.S. crude fell 4.73% to settle at 93.89$ per barrel, and Brent settled at $100.03 per barrel, down 3.94% on the day.
U.S. Treasury yields slid in choppy trading as economic data continued to hint at an impending slowdown which could prompt the Federal Reserve to slow the pace of interest rate increases.
Benchmark 10-year notes last rose 9/32 in price to yield 2.6091%, from 2.642% late on Friday.
The 30-year bond last rose 29/32 in price to yield 2.9302%, from 2.977% late on Friday.
The dollar touched its lowest level against the Japanese Yen since last June and the dollar index, which measures its performance against a basket of world currencies, was volatile in the wake of the PMI data. read more
The dollar index fell 0.4%, with the euro up 0.31% to $1.025.
The Japanese yen strengthened 0.97% against the dollar to 131.95, while sterling was last trading at $1.2247, up 0.67% on the day.
Gold prices edged higher as the dollar softened, as investors looked to economic data for clues regarding the pace of interest rate hikes from the U.S. Federal Reserve.
Spot gold added 0.2% to $1,768.73 an ounce.
Reporting by Stephen Culp; Additional reporting by Carolyn Cohn in London and Bansari Kamdar in Bangalore; Editing by David Holmes and Tomasz Janowski
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