Early Morning Call: European equity markets set to open higher
European equity markets opened in positive territory, but it's a slow start of the week on the corporate front. We are now at the tail-end of this summer's US earnings season. Lumber closing in on August 2021 support.
APAC overview
Trading was mixed on the Asia-Pacific region this morning, following the lead of last Friday’s US session.
Yesterday, China released its trade balance data for the month of July. In dollar terms, trade surplus widened more than anticipated to $101.26 billion, as exports rose 18% year-on-year (YoY), and imports increased by only 2.3%. China's iron ore purchases rose 3.1% in July YoY and 3% month-on-month (MoM) despite concerns over weak steel demand fuelled by a struggling property sector, sending iron ore higher this morning.
FX overview
The dollar is little changed today. On Friday, the greenback rallied after stronger-than-expected non-farm payrolls (NPF) data increased expectations of another 75-basis points (bps) hike at the Federal Reserve’s (Fed)next meeting in September.
The US economy added 528,000 jobs in July, the second-best performance this year, while June was revised up to 398,000. Wage growth jumped to 5.2% YoY.
This week, the main test for the US dollar will be the US consumer price index (CPI) due on Wednesday, expected to ease to 8.7% in July YoY, from 9.1% the previous month.
Meanwhile, the US housing market is showing signs of cooling down. Latest new home sales fell to their lowest level since April 2020, and recession fears were reignited after Friday’s US jobs data boosted probabilities of a 75bps hike at the next Fed meeting.
European equity markets
European equity markets opened in positive territory. It is a slow start of the week on the corporate front. PageGroup PLC posted a 79.4% jump in half-year (H1) operating profit, helped by strong hiring demand from companies. The global recruiter saw its revenue rise to £977.3 million, from £766.4m a year ago. It proposed an interim dividend of 4.91 pence per share, and a special dividend of 26.71 pence.
US earnings update
We are now at the tail-end of this summer's US earnings season. Tonight, after the Wall Street closing bell, the insurer AIG is expected to report earnings of $1.07 per share on revenue of $11.3bn.
Tomorrow, Coinbase Global Inc (All Sessions) is scheduled to post its quarterly report after market close. Analysts anticipate losses to widen to $2.44 per share, after the loss of $1.98 recorded for the first three months of the year. Revenue is also forecast to shrink to $879m, after $1.17bn in the first quarter (Q1).
On Wednesday, Walt Disney Co (All Sessions) earnings are expected at 98 cents for its fiscal third quarter (Q3), about 20% higher than the same quarter a year ago. Revenue is forecast to come just shy of $21bn, nearly $3bn higher than Q3 2021.
Streaming services Disney+ will undoubtedly be the main focus. In the second quarter (Q2), the number of new subscribers beat expectations, and revenue per user increased by 9%, a performance that contrasted with the downbeat results from its main competitor, Netflix Inc (All Sessions).
Long-term strategy is also something Walt Disney needs to update the market on. Investments are needed and some analysts fear that dollar strength, which is likely to have had an impact on earnings and revenue, may have forced the group to make some adjustments.
Commodities
Oil prices are rising this morning, after setting a six-month low at the end of last week.
Last Friday Baker Hughes total rig count fell by three to 764, a decline due to a drop in oil rig in operations to 598, seven lower than the previous week.
Commodity traders will also be attentive to lumber, after it recorded yet another week of declines, closing down on August 2021 support.
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