Dow rally more than 650 points on positive data, financials

Retail sales rose 1.0 percent last month, the Commerce Department said, exceeding a Reuters poll forecast of 0.8 percent. Data for May was revised up to show sales fell 0.1 percent instead of the previously reported 0.3 percent.

Retail sales increased 8.4 percent on a year-on-year basis and 18 percent above their pre-pandemic trend.

While the retail sales data was laudable, economists were cautious about pointing out that a big reason for the gains was from a spike in gasoline prices.

“Yes, consumers spend more, but they don’t take home the same amount of goods,” First Trust said in a note. “Adjusted for the consumer price index (CPI), retail sales fell 0.3 percent in June.”

Separately, consumers reduced their inflation expectations in July, a fourth report from the University of Michigan showed.

The yield on the US 10-year note fell 4 basis points to 2.92 percent as of 4:59 p.m. in New York. Two years it was at 3.12 percent.

Bill Adams, chief economist for Comerica Bank, said the outlook was as bleak as ever. “The US economy is almost at a standstill, and one more big shock would be enough to push it into a recession. The surprise may come from the energy crisis in Europe during the winter heating season, which could send US natural gas prices sharply higher, or from spillovers from the weakening Chinese economy.

“In the face of these challenges, the risk of a recession is roughly like a coin toss between now and the end of 2023.

Market spotlight

ASX futures rose 57 points or 0.88 percent to 6559

• AUD +0.6% to 67.93 US cents
• Bitcoin +1.3% to $US20,927.10 near 06:40 AEST
• On Wall St: Dow +2.2% S&P 500 +1.9% Nasdaq +1.8%
• In New York: BHP +2.1% Rio +1.3% Atlassian +2.1%
• Tesla +0.7% Apple +1.1% Amazon +2.6% Netflix +8.2%
• In Europe: Stoxx 50 +2.4% FTSE +1.7% CAC +2% DAX +2.8%
• Spot gold -0.1% to $US1708.17 per ounce at 17.00 New York time
• Brent crude +1.9% to $101.02 per barrel
• Iron ore -3.6% to $US96.60 per tonne
• 10-year yield: US 2.92% Australia 3.40% Germany 1.12%
• US prices start at 4:59 pm in New York

United States of America

The University of Michigan’s preliminary survey of consumers for July published on Friday showed consumers see inflation running at 2.8 percent for five years, the lowest in a year and down from 3.1 percent in June.

Their prospect of a one-year price increase moderated to 5.2 percent from 5.3 percent a month earlier and was the lowest since February.

The survey’s rising reading of consumer inflation expectations in its early June survey was a factor in Fed officials’ decision to raise interest rates last month by three-quarters of a percentage point rather than just half a point.

A separate report from the Fed showed factory output fell 0.5 percent last month, matching a fall in May. That reflected a decline in output of durable manufactured goods and non-durable consumer goods, and helped push overall industrial production down 0.2 percent.

BlackRock said it was tightening its belts and delaying some hiring amid an economic environment that has spooked retail investors and lowered its quarterly profit.

The world’s biggest asset manager said total spending is likely to end in 2022 with 15 percent growth, the bottom half of previously announced guidance. It delays hiring of seniors into next year and brings more junior employees into certain roles, noting that they try to “compile” a number of roles where appropriate.

Europe

Automakers and retail stocks on Friday led the rebound in European stocks from two days of declines. The STOXX 600 index across the continent ended 1.8 percent higher.

Italian shares rose 1.8 percent, bouncing off 2-1/2 year lows hit in the previous session as investors awaited further developments in the country’s political crisis.

Italian President Sergio Mattarella rejected Prime Minister Mario Draghi’s resignation on Thursday and asked him to address parliament next week.

Stuart Cole, chief macro economist at Equiti Capital: “The market is very volatile right now so I wouldn’t suggest this is a shift in sentiment to something more positive.”

The STOXX 600 is down 0.8 percent this week against a backdrop of fears of an energy supply crisis due to the Russo-Ukrainian war.

The Nord Stream 1 critical gas pipeline to Germany from Russia is set to reopen on July 21 after being closed for maintenance this week.

The European Central Bank is also widely expected to raise interest rates by 25 basis points next week, although analysts have begun to expect a slight 50 bps hike amid the deteriorating outlook for the euro against the US dollar.

Among stock-based news, Volkswagen gained 3.5 percent after its China unit remained on the goal of doubling sales of its ID series electric vehicles this year despite the COVID-19 disruption.

Commodity

The three-month copper contract on the London Metal Exchange was up 0.2 percent at $7186.50 a tonne by 1600 GMT.

It earlier fell as much as 3 percent to $6955 a tonne, slipping below $7000 for the first time since November 2020.

**

Dalian and Singapore iron ore futures fell below $100 on Friday amid growing concerns over reduced demand for steel, as China’s economy faltered in the second quarter.

September iron ore, which was most traded on China’s Dalian Commodity Exchange, fell 10 percent to 645 yuan ($95.32) a tonne in late afternoon trading, having earlier hit 641.50 yuan, its lowest since Dec. 15.

It has fallen 13.3 percent this week, its steepest drop since mid-February.

On the Singapore Stock Exchange, the August front-month contract for steel-making materials fell 4 percent to a session low of $96.25 a tonne, the weakest since November, putting it on track for a weekly loss of more than 11 percent. .

#Dow #rally #points #positive #data #financials