Traders’ Diary: Everything you need to get ready for the week ahead

What grabbed the headlines last week?

The benchmark ASX200 managed a slight win last week.

It rather felt like a loss after the chiding major stocks got on Friday.

Equity markets everywhere went redwards to end a tempestuous week of trade, one which began with US rate cut optimism, but ended on renewed willies about what the US and China might do to one another on the economic, tariffs and Taiwan front.

The S&P drooped 0.8% on Friday.

Over the last five days, the index is back to where it began, but is already 1.4% from its record high.

Sure, ex-president Donald Trump’s sudden grip on the November election has markets whipping the calculators out, since his people have been talking up a new 60% tariff on all Chinese imports.

But the late-week equity sell-off following rule-tightening for all US chip-tech businesses selling into China is all a creation of the current administration.

Around major markets the tech stocks remain well under pressure following some enthusiastic profit taking in the wake of the latest record highs, which somehow seemed more of a milestone than previous wins, as both investment and geostrategic interests tried to digest the US political upheaval.

For the week US shares fell 2%, Eurozone shares fell 3.4% and Japanese shares lost 5.1%, but despite the disappointment around the Third Plenum, Chinese shares managed to rise 1.9%.

The Nasdaq heavyweights copped it again – they look a little iffy for once just as earnings comes round, while the other thing coming round is this rotation out of Big Tech to wee caps and perhaps anything remotely benefiting from The Trump Trade.

Closer to our end of the planet, Trump 2.0 is perhaps much more of a lose-lose trade.

Hong Kong’s Hang Seng index is one of the week’s worst performers, although shares in mainland China bucked the trend on suspected ETF purchases by the Chinese government.

Adding to the gloom is the disappointment from China’s Third Plenum that ended without any major policy announcements to shore up consumers or the beleaguered property market.

That IT outage alone would not have helped sentiment any.

Monday might be more of the same, there’s a lot to worry about after what they’re calling the largest IT outage in history. Add that to more upheaval in the US… now that an early Joe Biden exit seems a possibility for the November presidential race.

Meanwhile, we’re watching stock markets rotate with almost reckless abandon.

The rejig of portfolios was pronounced on the ASX, where rate-sensitive and defensive sectors advanced led by real estate, at +1.7%, while the Materials and Tech Sectors dropped 2.2% and 1.8%, respectively.

The moves were more pronounced on the benchmark at the stock level:

ASX Losers on Friday:

Deep Yellow (ASX:DYL) fell 16.9%, Lifestyle Communities (ASX:LIC) lost 14%, Sandfire Resources (ASX:SFR) -7.5%, Domino’s Pizza Enterprises (ASX:DMP) -6.5%, Megaport (ASX:MP1) -6.1%, Rio Tinto (ASX:RIO) -4.9%, NextDC (ASX:NXT) -4.6%, BHP (ASX:BHP) -3.8%, Xero (ASX:XRO) -3.6%, and JB HiFi (ASX:JBH) down 1.5%.

Local equities surged happily enough the 8,000 point level earlier last week, but a sentimental misstep and some less glamorous global leads, yielded froth and volatility to see stocks add just 0.2%.

The buying in Aussie IT stocks was only equalled and beat by the late week selling.

As for the ASX stocks in the businesses known as Materials (resources basically) are being inexorably ground down like the individual human spirit in the face of Totalitarian rule or that of the human condition trapped by the institution of marriage.

Commodity prices are a problem. Last week oil, metal and iron ore prices fell. The distinct lack of any new stimulus or economic direction from Beijing’s headline Third Plenum in China did nothing to help the feeling that Materials are between rocks and hard places.

It’s happier generally for the rate-sensitive names there’s been solid gains in Real Estate, Consumer Discretionary, Healthcare, Industrial and Financial stocks.

Bond yields were higher in the States, but largely declined elsewhere on the solidifying prospects for central bank rate cuts.

Seven of the 11 ASX sectors ended higher last week, along with the S&P/ASX 200.

ASX Sectors last week

The week ahead

This week there’s a Justice League of flash PMI data to study in the USA after June figures provided more evidence of resilience, growth and declining inflation.

“This goldilocks environment will be essential to sustain the enthusiasm that we have observed in the equity market midway into July, especially against a backdrop of broad-based sector growth,” as per S&P Global.

Insights into the US growth environment will also be provided with the advance release of Q2 GDP for the US, which is expected to show growth accelerating from the 1.4% yearly rate seen in Q1 to 2.1%.

The Fed’s preferred inflation gauge, the core PCE reading, will also be updated on Friday and watched for clues on the monetary policy outlook. Following recent inflation updates, including softer PMI price index and consumer price index readings, expectations have built for a September rate cut. As such, both the core June PCE and the more up-to-date July PMI prices data will provide policy guidance ahead of the end-July Federal Open Market Committee (FOMC) meeting.

With a very familiar-looking commodity rich economy, the Canuck central bank decides what to do with interest rates on Wednesday. The Canadian consensus leans toward ‘time to cut’.

Economic conditions out that way aren’t great but unlike us, there’s good evidence of easing inflationary pressures.

“Whether the BoC chooses to act at the start of the second half of 2024 will fuel expectations for other major developed central banks,” S&P Global says.

Ah yes. Closer to home we’ve a gaggle of handy economic indicators.

The APAC region will analyse South Korea’s GDP, inflation reads from Singapore, the Hong Kong SAR and Malaysia.

Industrial production will also be closely watched, with this part of the world a key driver for manufacturing growth last month.

The Economic Calendar

Monday July 22 – Friday July 26

MONDAY
Thailand Market Holiday
China (Mainland) Loan Prime Rate (Jul)
Taiwan Export Orders (Jun)
Hong Kong SAR Inflation (Jun)
Mexico Retail Sales (May)
United States Chicago Fed National Activity (Jun)
Germany Retail Sales (May)

TUESDAY
South Korea PPI (Jun)
Singapore Inflation (Jun)
Turkey Consumer Confidence (Jul)
Taiwan Industrial Production (Jun)
Taiwan Retail Sales (Jun)
Canada New Housing Price Index (Jun)
Eurozone Consumer Confidence (Jul, flash)
United States Existing Home Sales (Jun)

WEDNESDAY
Australia Judo Bank Flash PMI, Manufacturing & Services*
Japan au Jibun Bank Flash PMI, Manufacturing & Services*
India HSBC Flash PMI, Manufacturing & Services*
UK S&P Global Flash PMI, Manufacturing & Services*
Germany HCOB Flash PMI, Manufacturing & Services*
France HCOB Flash PMI, Manufacturing & Services*
Eurozone HCOB Flash PMI, Manufacturing & Services*
US S&P Global Flash PMI, Manufacturing & Services*
South Korea Consumer Confidence (Jul)
New Zealand Trade (Jun)
Malaysia Inflation (Jun)
Germany GfK Consumer Confidence (Aug)
South Africa Inflation (Jun)
Taiwan Unemployment (Jun)
Canada BoC Interest Rate Decision
United States New Home Sales (Jun)

THURSDAY
South Korea GDP (Q2, adv)
Germany Ifo Business Climate (Jul)
Hong Kong SAR Trade (Jun)
Turkey TCMB Interest Rate Decision
United States Durable Goods Orders (Jun)
United States GDP (Q2, adv)
United States Wholesale Inventories (Jun, adv)

FRIDAY
Thailand Industrial Production (Jun)
Singapore Industrial Production (Jun)
Thailand Trade (Jun)
United States Core PCE Price Index (Jun)
United States Personal Income and Spending (un)
United States UoM Sentiment (Jul, final)