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Stocks Slide, Amazon Cut, China Stocks Reverse, PCE Prices - What's Moving Markets

EconomyJul 30, 2021 21:04
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By Geoffrey Smith -- Stock futures slide as Amazon (NASDAQ:AMZN)'s slowing sales growth undermines the narrative for growth stocks. Chinese stock markets reverse after fresh regulatory action and trouble with overleveraged property developers. U.S. personal consumer expenditure price data will be scanned for signs of inflation. And the Eurozone grew faster than expected as the continent reopened in spring. Here's what you need to know in financial markets on Friday, 30th July.

1. Concern at Amazon's growth slowdown

Amazon stock fell sharply in premarket trading after signs that the pandemic-driven boost to its core e-commerce business is fading.

The company said net sales growth fell to 27% year-on-year from 44% in the first quarter, despite the group moving up its annual Prime Day from its usual slot in the third quarter. Sales growth since then has only been around 15%, CFO Brian Olsavsky was quoted by Reuters as saying.

The development means that three of the five megacap stocks that have carried the stock market this year weakened after their quarterly updates (Apple (NASDAQ:AAPL) and Facebook (NASDAQ:FB) being the other two).  Elsewhere, Pinterest (NYSE:PINS) stock fell nearly 20% in premarket after it, too, was hit with broker downgrades after a disappointing quarterly report.

2. Chinese markets head down again

China’s stock market bounce didn’t last long. Hong Kong’s Hang Seng index fell 1.3%, and mainland indices fell by between 0.5% and 2.3%, on a combination of factors that revived existing concerns.

Regulators issued a high-profile warning to root out ‘illegality’ among ride-hailing groups, a move interpreted as a fresh attack on the national champion Didi Global (NYSE:DIDI). Didi ADRs fell 7.2%.

In addition, China Evergrande Group (OTC:EGRNY) shares fell as much as 11% to new record lows after a court froze the assets of the highly-indebted real estate developer's listed onshore subsidiary. The group’s bonds also slumped, with spillover effects on to the bonds of other companies in the sector.

Market sentiment in Hong Kong was also hit by a nine-year sentence handed down to a pro-democracy protestor under the city’s new security law, a visible measure of how thoroughly Beijing wants to assert its control over the territory.

3. Stocks set to open lower; Big Oil earnings and PCE data due

U.S. stock markets are set to open sharply lower later, with the declines in Amazon and Pinterest stock adding to disappointment at second-quarter growth figures published on Thursday.

By 6:20 AM ET (1020 GMT), Nasdaq futures were down 1.1%, while S&P 500 futures were down 0.7 and Dow Jones futures were down 97 points, or 0.3%.

The early focus may be on the index for second-quarter personal consumer expenditures, widely seen as the Federal Reserve’s preferred measure of inflation. The market will be anxious to avoid numbers that show inflation running ahead of expectations even as GDP growth undershoots them. The core PCE price index is expected to have risen 0.6% in June and accelerated to an annual rate of 3.7%, which would be its highest in nearly 30 years.

Also in focus will be Robinhood (NASDAQ:HOOD) stock after a weak debut on Thursday, and Procter & Gamble (NYSE:PG), whose CEO is stepping down. There will also be earnings from Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX), Berkshire Hathaway (NYSE:BRKa), Caterpillar (NYSE:CAT) and AbbVie (NYSE:ABBV), among others.

4. Eurozone's spring reopening went better than expected

The Eurozone economy grew more quickly than expected in the second quarter, as positive surprises in France, Spain and, especially, Italy offset a slight disappointment in Germany.

Eurostat said that GDP grew 2% quarter-on-quarter, something that translates into higher annualized growth than the U.S.’s 6.5%. The numbers reflect, among other things, the fact that the vaccination-driven reopening of the economy started later in Europe than in the U.S.

Eurozone inflation also exceeded expectations in June at 2.2%, but the European Central Bank has repeatedly stated its intention to look through what it expects to be a short-term spike in price.

Elsewhere in Europe, Unicredit (MI:CRDI) stock rose over 5% after it announced the outlines of a deal to buy the country’s long-running problem bank Monte dei Paschi di Siena. Unicredit said the deal will not affect its capital levels or expose it to legacy risks from the scandal-plagued bank.

5. Oil off highs on growth fears

Crude oil prices came off their highs on fresh fears about the strength of the U.S. and Chinese economies but are still set for a second straight weekly gain.

By 6:30 AM ET, U.S. crude futures were down 0.4% at $73.34 a barrel, while Brent crude futures were down 0.4% at $74.83.

The Baker Hughes rig count and the Commodity Futures Trading Commission’s report on the commitments of traders round out the week’s data later in the day.

Stocks Slide, Amazon Cut, China Stocks Reverse, PCE Prices - What's Moving Markets

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