Yazar: Geoffrey Smith
Investing.com — Stocks tumble as a slowdown in sales growth undermines the story about growth stocks. Chinese markets fell again amid new regulatory action and problems with over-leveraged real estate developers. US (PCE) price data will be watched closely for signs of inflation. And the Eurozone grew faster than expected.
Here’s what you need to know in financial markets for Friday, July 30:
1. Amazon’s slowdown in sales growth worries
Amazon stock slumped in the premarket, amid signs that its core e-commerce business has waned support due to the pandemic.
Despite the company pulling Prime Day to June, it experienced 27% year-on-year growth in net sales in the second quarter, compared to 44% growth in the first quarter. Since then, sales growth has only been around 15%, according to a Reuters report quoting CFO Brian Olsavsky.
That means three of the five mega-capacity stocks leading the stock market this year have weakened (the other two being Apple (NASDAQ:) and Facebook (NASDAQ:), while Pinterest (NYSE:) shares, which delivered a disappointing quarterly report. It lost about 20% in value with the company’s investment grade lowered.
2. Chinese stock markets are down again
The recovery in the Chinese stock markets did not last long. Hong Kong’s indexes fell by 1.3% and mainland indexes fell between 0.5% and 2.3%, as a combination of many worrying factors.
Regulators have issued a high-level warning to eradicate ‘illegality’ among ride-hailing companies, which the move has been interpreted as a new attack on national champion Didi Global. Didi ADRs fell 7.2%.
Meanwhile, Chinese Evergrande shares fell 11%. A court froze assets belonging to the onshore subsidiary of the highly indebted real estate group. With the spillover effect on the bonds of other highly leveraged companies in the sector, the bonds of the group also decreased.
Market sentiment in Hong Kong has also been hit by the nine-year prison sentence given to a pro-democracy protester under the city’s new security law. This is a clear indication of how much Beijing wants to increase its control over the region.
3. Stock market will open low, earnings reports of Big Oil companies and PCE data will be published
US stock markets will open lower. The drop in Amazon and Pinterest shares added to the disappointment of the second-quarter growth figures released on Thursday.
It fell 1.1%, while it lost 0.7% and 0.3%.
First, interest may be in the second-quarter personal consumption expenditures (PCE) index. The market will be worried that the inflation rate will exceed expectations, even if the GDP misses expectations. The core PCE index is expected to rise to 0.6% in June and 3.7% year-on-year – the highest level in nearly 30 years.
Robinhood (NASDAQ:) is likely to gain traction after its weak debut on Thursday and Procter & Gamble (NYSE:) as its CEO resigns. also Exxon Mobil (NYSE:) ve Chevron (NYSE:), Berkshire Hathaway (NYSE:), Caterpillar (NYSE:) and AbbVie (NYSE:) will report.
4. The opening of the Eurozone economies in the spring months had an effect above the expectations
Eurozone economy grew more than expected in the second quarter. Positive surprises in France, Spain and especially Italy compensated for the disappointment in Germany.
Eurostat said GDP grew by 2% on a quarterly basis. This translates to higher annual growth versus the US’s 6.5% growth rate. The data also shows the impact of European economies reopening earlier than in the US, thanks to vaccination.
Euro zone inflation also exceeded expectations with 2.2% in June, but the European Central Bank (ECB) stated that it wanted to watch the short-term increases in prices.
In Europe, Unicredit (MI:) also gained more than 5%. The bank disclosed details of its deal to acquire Monte dei Paschi di Siena, the country’s long-troubled bank. Unicredit said the deal would not affect capital levels or expose the bank to the old risks of scandal-hit di Siena.
5. Growth fears drive oil prices down
Crude oil prices fell on fears over the growth rates of the US and Chinese economies, but are still on track for the second week in a row.
Futures were down 0.4% to $73.34, while they were down 0.4% to $74.83.
The week ends with the Baker Hughes tower count and the Commodity Futures Trading Commission (CFTC) report.