European share investors ignored better macro-economic data to sell down earnings disappointment on Friday night. US stocks fared better, as more companies jumped a low earnings bar, and US indices finished higher. However the US dollar rallied and bonds and gold continue to find good support in a sign of deteriorating sentiment.
The central bank and government inspired “bad news is good news” market dynamic is fading fast. Instead, rising infection rates and the re-institution of lockdown measures is rattling confidence in a fast recovery from the disruption of the first half of 2020.
Older fears are coming back to haunt the market. The US Secretary of State said over the weekend that the White House will “announce measures against a broad array” of China tech companies, including the popular “Tik-Tok” app. The moves re-focus market attention on Sino-US trade relations as the US election looms.
The US Congress also failed to agree an extension of extraordinary support measures for the unemployed. This raises the spectre of the government shutdowns that resulted from a legislative logjam, leaving further fiscal support programs in doubt.
As US the reporting season approaches the two-thirds mark, sales (+2%) and earnings (+22%) continue to run ahead of forecasts. However these are down quarter-on-quarter 11.5% and 10.5% respectively. Healthcare is the stand out sector, with both sales and profits up 5%.
Japanese GDP data released this morning is better than expected, slowing at an annual rate of 2.2%, against forecast falls closer to 2.8%. The Caixin China manufacturing PMI released around midday is estimated at 51.1, although analysts are edging towards upside surprise after Friday’s stronger than forecast official read. Singapore’s July PMI tonight is to improve slightly from last month’s 48.0 to 48.6.
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