After yesterday's latest drop in stocks driven by “old economy” companies such as CAT, which sent the Dow Jones back to red for the year and the S&P fractionally unchanged, today has been a glaring example of the “new” vs “old” economy contrast, with futures propped up thanks to strong tech company earnings after the close, chief among which Amazon, which gained $40 billion in after hours trading and has now surpassed walmart as the largest US retailer.
Ironically, AMZN's beat was not due to its retail results but thanks to its ongoing AWS/cloud rollout which will continue as long as the second tech bubble rages on because while AMZN's market cap may be bigger than WMT, whatever you do, don't compare PE multiples.
Away from techs it has been a very different story, with the previously noted flash smash in gold, a near carbon copy of Sunday's (un)precedented plunge, coupled with the tumble in copper as well as ongoing oil price drop this time catalyzed by the worst Chinese Caixin (now that Markit is out) manufacturing PMI in 15 months, together with European PMI misses across the board, most notably those out of Germany and France.
As a result Brent crude is little changed near 2-wk low after disappointing Chinese manufacturing data fueled demand concerns, adding to bearish sentiment in an oversupplied mkt. WTI up ~26c, trimming losses after day falling to lowest since March 31 to close in bear mkt. Both Brent and WTI are set for 4th consecutive week of declines; this is the longest losing streak for Brent since Jan., for WTI since March.
Crude “made a move a little bit higher, but it's not surprising to be turning around again following disappointing PMI data,” ABN Amro energy economist Hans van Cleef said. “Combined with the oversupply situation, this adds to the bearish sentiment.”
It wasn't just crude: the entire commodity complex continues to get clobbered:
And while we covered China's latest PMI disappointment noted flash smash in gold, one which even managed to send the SHCOMP to a red close, it was Europe which confirmed that away from the “tech economy” things are once again relapsing and the global economy is poised for what appears to be another contraction.
The highlights:
Driven by Germany:
And France:
Visually:
A closer look at markets shows Asian equities which traded mostly lower following the weak close on Wall Street amid a bout of discouraging earnings, while a strong result from Amazon after-market, led to a recovery in NASDAQ futures . Sentiment in the Asia-Pac region was also dampened by Chinese manufacturing PMI printing a 15 month low which weighed on all indices, despite some suggestions the poor data supports calls for further measures from Chinese authorities. JGBs traded with minor gains supported by weakness across riskier assets, but came off its best levels after a poorly received enhanced liquidity auction where the b/c was the worst in 2 months. Caixin Chinese Manufacturing PMI (Jul P) M/M 48.2 vs. Exp. 49.7 (Prey. 49.4); 15-month lows.
In Europe, markets trade in positive territory heading into the North American crossover , (Euro Stoxx: %) as indices look to pare back some of the recent losses seen throughout the rest of the week. This comes as equities shrug off the worse than expected PMIs and fairly mixed high profile earnings, including Vodafone (+3.4%), Anglo American (+1.4%) and BASF (-3.2%).
Aftermarket yesterday saw Amazon.com Inc report Q2 EPS USD 0.19 vs. Exp. Loss/Shr 0.14 and Q2 sales USD 23.18bIn vs. Exp. USD 22.4b1n, with the Co. forecasting Q3 net sales at USD 23.3bIn-25.5bIn vs. Exp. USD 23.9bIn to trade higher by 18.5% pre-market. Elsewhere, Visa, who make up 2.7% of the Dow, reported Q3 Adj. EPS USD 0.74 vs. Exp. USD 0.58 and Q3 revenue USD 3.52b1n vs. Exp. USD 3.36b1n to trade higher by 4.6% premarket. Today's notable US earnings include AbbVie and Biogen.
