Morning Minutes

Asia Turmoil Drags Stocks Downward




A rocky start to the trading week for stock markets in China which saw the Hang Seng plunge 4.1% and Shanghai fall 2.3% overnight has sent shockwaves through the trading world. Increasing government intervention into a wider number of sectors including education and internet companies, and no diplomatic progress at a meeting between Chinese and US officials today appear to be the main factors putting pressure on Chinese markets. A lack of any other news over the weekend except for rising COVID Delta Wave case counts in some countries hasn’t helped sentiment either.

In this choppy environment, US index futures are giving back some of Friday’s gains with losses varying between 0.05% for NASDAQ futures to 0.25% for Dow futures. In Europe today, the FTSE is down 0.25% while the Dax is down 0.45%. Commodities are mixed today with natural gas soaring 2.1%, copper climbing 1.7%, but WTI crude oil falling 0.5%. Interestingly, cryptocurrencies have started to attract renewed attention with Bitcoin soaring 11.7% and Ethereum rallying 8.7%.

So far today the only US earnings report of note has been toymaker Hasbro which crushed expectations ($1.05 vs street $0.47). Some of the Chinese companies impacted by recent government interventions that are listed in the US are getting smashed in premarket action including: TAL Education (down 70.7% premarket after China banned commercial tutoring services for core school subjects), Tencent Music (down 11.0%), and Didi Global (down 21.0%).  

That being said, a LOT of corporate news is on the way this week as we move into the peak of earnings season with results due from several companies in the Big Tech, Big Pharma, Big Oil and Big Mining groups. Headliners include: Tesla Motors later today, Apple, Google, Microsoft and Visa tomorrow, Facebook, Shopify, and McDonalds Wednesday,, Boeing, Merck, Pfizer and Suncor Thursday, and wrapping up Friday with Exxon, Chevron, Caterpillar, Mastercard.

In Canada this morning, the energy sector has been active with Inter Pipeline announcing that it has broken off its friendly takeover deal with Pembina Pipeline and will pay a $350M break fee and plans to open up talks with rival suitor Brookfield Infrastructure Partners.

It’s the last week of the month so economic news also picks up again this week, headlined by US durable goods orders on Tuesday, a Fed decision and statement on Wednesday, US Q2 GDP on Thursday and Canada monthly GDP plus Chicago PMI on Friday.

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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