Global Markets React to PCE Data, Apple's China Sales, and European Earnings

PCE release, Apple's Chinese sales, European earnings - what's moving markets By Investing.com

Investing.com -- Wall Street looks set to end a difficult week on a bright note, although the release of the Federal Reserve's favorite inflation gauge later in the session could influence sentiment. Apple is losing market share in the important Chinese market, while European corporate earnings continue to flow. The spotlight Friday will be on the Federal Reserve's preferred gauge of inflation, which could test market expectations that the U.S. central bank is all but certain to cut interest rates in September. June's personal consumption expenditures (PCE) price index is expected to have climbed 0.1% on the month, with the annualized figure at 2.5%, very close to the Fed's 2% target. Additionally, "Friday's June core PCE inflation report is expected to show a 0.2% m/m increase in prices last month, leaving the year-ago increase unchanged at 2.6%," JPMorgan (NYSE:JPM) economists said in a note. The consumer price index fell in June for the first time in four years, cementing market expectations that the Fed is primed to cut interest rates, although next week's meeting is likely too soon. U.S. stock futures edged higher Friday ahead of a key inflation reading, but Wall Street remained on course for hefty losses this week, led lower by the tech sector. However, all three indices are set to post a losing week, with the S&P 500 down 1.9% so far, the Nasdaq losing nearly 3.1%, and the DJIA down roughly 0.9%. All eyes will be on the release of June's personal consumption expenditures report, the Fed's favorite inflation reading, as investors look for more clues pointing to a September rate cut. There will be more earnings to digest Friday, from the likes of Bristol Myers (NYSE:BMY), 3M Company (NYSE:MMM) and Colgate-Palmolive (NYSE:CL). Apple (NASDAQ:AAPL) is facing intensifying competition in China, its third-largest market, resulting in the iPhone maker dropping out of the top five in a list of smartphone vendors. Apple's smartphone shipments in China fell by 6.7% in the second quarter of 2024, according to data from market research firm Canalys, with total shipments of 9.7 million units, down from 10.4 million units in the same quarter last year. Apple's shipments have been declining since the first quarter when they dropped 25% year on year to 10 million units. Chinese consumers are increasingly turning to local suppliers for their smartphones, as these Chinese brands aggressively incorporate generative AI into their products. The Canalys data revealed that Apple's market share decreased to 14% from 16% in the same quarter of 2023, with its ranking in the Chinese smartphone market falling from third to sixth place. Vivo was the top vendor with a share of 19%, followed by Oppo, Honor and Huawei with 16%, 15% and 15% respectively. The quarterly earnings season is also continuing in Europe, with investors digesting results from a number of important companies. Mercedes Benz (ETR:MBGn) stock fell after the German luxury automaker narrowed its annual forecast for the profit margin in its core car division, adding to the weakness in the sector in the region after Stellantis (NYSE:STLA) reported on Thursday a sharp fall in net profit for the first half of 2024. Capgemini (EPA:CAPP) stock slumped 9% after the French IT consulting group forecast a surprise fall in annual revenue, citing persistent weakness in its North American market. EssilorLuxottica (EPA:ESLX) stock rose 7% after the eyewear maker reported a strong financial performance for the first half of 2024, underpinned by solid revenue growth and margin expansion. Hermes (EPA:HRMS) stock gained 3% after the luxury goods company reported a hefty rise in second-quarter sales, demonstrating the continued appetite for its expensive handbags. Crude prices stabilized Friday, but were on track for a third straight week of decline, largely due to weak demand in China, the world's largest crude importer. By 04:00 ET, the U.S. crude futures (WTI) traded largely flat at $78.28 a barrel, while the Brent contract rose 0.1% to $82.39 a barrel. The Brent contract was trading marginally lower this week, while WTI was down over 2%, and the benchmarks have fallen about 5% in the last 3 weeks. Concerns over waning demand in China have weighed heavily, with data this week showing the Asian giant's apparent oil demand fell 8.1% to 13.66 million barrels per day in June. Gross domestic product data, released last week, showed the Chinese economy grew less than expected in the second quarter, and Beijing has unexpectedly cut a swathe of lending rates this week, suggesting growing concerns over sluggish growth in the country.

Morning Bid: Stocks try to shake it off and rotate

A look at the day ahead in U.S. and global markets from Mike Dolan The end of a hair-raising week for the stock market has left more questions than answers, with Thursday's bumper U.S. growth data goosing a blistering rotation to small cap stocks as traders brace for three major central bank decisions next week. Before the Federal Reserve's latest policy decision on Wednesday, the central bank gets an update on its favored inflation gauge later today. Core PCE prices are expected to have risen just 0.1% last month, with the annual rate slipping to a three-year low of 2.5% - a halving of that rate of inflation in 18 months. Even though former New York Fed boss Bill Dudley this week called for an immediate rate cut to get across a weakening jobs market, futures remain nailed on for a first move in September. Whether due to those easing bets or post-election trades or both, this month's switch to U.S. small cap stocks from pricey Big Tech megacaps seems to have survived the jarring mid-week market swoon that questioned the whole complex. Even though the S&P500 failed to sustain Thursday's attempted early bounce, the Russell 2000 small cap benchmark closed more than 1% higher and futures have it extending those gains by a further 2% ahead of Friday's bell - putting it back in sight of 2-year highs. Small caps have now outperformed megacap indexes by a whopping 15% since the start of this month. Handily absorbing another $183 billion of new coupon sales this week, Treasury yields stayed focussed on Fed easing prospects too - with two-year yields clinging on to 4.40% after hitting 5-month lows below that level on Thursday. The steepening yield curve calmed down a bit. Wild swings in the stock market this week were almost matched in the currency market too, with the yen's surge to near three-month highs spurred by speculation the Bank of Japan may lift interest rates there on the same day as the Fed decides policy next week. The yen stepped back a bit on Friday, however, with the dollar/yen pairing recapturing 154 after a Tokyo inflation update that saw core price gains remaining well below the BOJ's target. The battered Nikkei, which has now lost more than 10% since July 11, failed to catch a break and ended lower on Friday again. China's yuan also fell back from Thursday's peaks as markets tried to figure out whether this week's surprising spate of easing from People's Bank of China would be followed up by more stimulus from Beijing to buoy the flagging economy. Concerns about China's economy linger even after authorities said on Thursday they would allocate 300 billion yuan ($41.4 billion) in ultra-long treasury bonds to support a programme of equipment upgrades and consumer goods trade-ins. Benchmark Chinese stocks eked out a small gain on Friday. The other major central bank meeting next week is the Bank of England. Even though a majority of economists polled think the BoE will cut as soon as August 1, money markets think it's in the balance and still only ascribe a 50-50 chance. The pound caught a toehold after retreating to two-week lows yesterday. Back on Wall Street, Friday's earnings calendar thins a bit but next week brings another round of Big Tech megacap reports to test growing concerns about valuations and big capex spends on artificial intelligence. Even though the overall profit growth picture remains buoyant, some single stock earnings day moves continued to be eye-catching. Ford Motor's shares tumbled over 13% to a near six-month low on Thursday after the automaker missed estimates as it struggles with quality-related costs and stiff competition in its EV business. Elsewhere, NatWest gained 8% after the British bank said it would buy Metro Bank's mortgage portfolio for 2.4 billion pounds. Key developments that should provide more direction to U.S. markets later on Friday: * US June PCE inflation gauge, personal income and consumption. University of Michigan's final July sentiment survey * US corporate earnings: Aon, T Rowe Price, 3m, Bristol-Myers Squibb, Centene, Charter Communications, Colgate-Palmolive, Franklin Resources (By Mike Dolan; Editing by Toby Chopra; mike.dolan@thomsonreuters.com)