Nationwide house price index falls 3.5% in June, the most since 2009

Indices overview

The S&P 500 and Nasdaq are about to record a fourth consecutive month of gains. In June alone the S&P 500 has rose over 5%.

Meanwhile it was a mixed session overnight in Asia. The Nikkei underperformed the region, but posts monthly of 7%, as it hit 33-year high on June 16.

The Japanese currency is about to post a third straight week of losses against the dollar and briefly passed the ¥145 mark on Friday. It was at that level that, in September 2022, the Japanese government intervened to support its currency. It intervened again a month later when USD/JPY rose to ¥151.

China's factory activity declined for a third straight month in June. The official NBS manufacturing PMI rose to 49, from 48.8 in May, crucially staying below the 50-point mark that separates expansion from contraction. Services sector activity for June recorded its weakest reading since China abandoned its strict Covid curbs late last year but remained well above 50. The readings pushed the yuan to a new eight-month low.

UK GDP

As expected, UK gross domestic product (GDP) final reading for the first quarter (Q1) shows a 0.1% rise quarter-on-quarter (QoQ).

British house prices rose by 0.1% in June from May, according to Nationwide. Compared with June last year, the average house price was down 3.5% after a 3.4% annual fall in May, the most since 2009. The drop was expected as the Bank of England (BoE) puts all its efforts to curb inflation rate among the world's big rich economies.

Much of the impact of higher borrowing costs on mortgage-holders has yet to hit the housing market. Industry body UK Finance estimates 800,000 fixed-rate mortgages will need to be refinanced in the second half of this year, and a further 1.6 million in 2024. There is a total of around nine million residential mortgages in the UK.

Macroeconomics

Among the macroeconomic indicators expected today, the market will be particularly focussed on one. Core PCE price index is expected to rise by 0.4% in May compared to April. Year-on-year (YoY), the index is forecast at 4.7% unchanged on last month. Core PCE is the Fed's favoured indicators when it comes to look at price evolution.

Equities

Nike shares dropped 4% in extended hours after it forecast first quarter revenue below Wall Street estimates. Investors were worried that sales in China would disappoint given the country's lacklustre economic recovery. This wasn't the case at all. Greater China was in fact a bright spot in Nike's quarterly report. Sales jumped 16% after three consecutive quarters of declines.

It was North America's performance that weighed on earnings and sales, where still-high inflation has led to consumers buying essential goods and reducing discretionary spending. Sales rose 5% in the region in the fourth quarter, the slowest in four quarters.

Overall, it was a tepid report. Nike's fourth quarter revenue rose to $12.8Bln, marginally beating estimates of $12.58Bln. Earnings came in at 66 cents per share, missing estimates by two cents.

There was nothing exciting it terms of forecasts either. As Nike's CEO said, "the environment is going to continue to be promotional", as the group is still struggling to get rid of excess inventories.

Nike's gross margin fell 140 basis points to 43.6% in Q4. Nike expects revenue to be between flat to up low-single digit in Q1, compared with analysts' average expectation of 5.8% rise.