To The Moon

Dovish Powell Boosts Wall Street; Chinese Stocks Rebound After Weak PMI Data Sparks Stimulus Hopes

🇺🇸 S&P 500: +1.58% 📈  

🇺🇸 Nasdaq: +2.64% 📈  

🇪🇺 Stoxx 600: +0.80% 📈  

🇯🇵 Nikkei 225: +1.49% 📈  

🇭🇰 Hang Seng Index: +2.01% 📈  

🇨🇳 CSI 300: +2.16% 📈  

On Wednesday, U.S. markets generally rose, with the S&P 500 and Nasdaq Composite increasing by 1.6% and 2.6%, respectively, due to a rise in chip stocks and the Federal Reserve holding interest rates steady while hinting at potential easing in September if inflation cools. $Nasdaq100 Bear 3X ETF(SQQQ)$  $Invesco QQQ(QQQ)$  

The Federal Reserve kept the benchmark overnight rate in the 5.25%-5.50% range but left the door open for potential easing in September based on further data, while the 10-year Treasury yield fell to 4.043%.

Eurozone headline inflation edged up from 2.5% year-on-year in June to 2.6% (versus a market expectation of 2.4% year-on-year), which seems to reduce the likelihood of an ECB rate cut in September.

The Bank of Japan raised its policy rate from 0% to 0.1% to 0.25% and outlined plans to halve its monthly bond purchases by March 2026, a decisive tightening move aimed at narrowing the dollar-yen interest rate gap that contributed to the yen's record weakness.

In June, Japan's retail sales rose by 3.7% year-on-year (versus an expected 3.3%), up from 2.8% previously, driven by rising wages that continued to stimulate consumption. However, industrial production fell by 7.3% year-on-year in June (following a 1.1% rise in May) due to production halts from certification scandals and weakened overseas demand for semiconductor-related equipment.

APAC markets showed optimism, with the Hang Seng Index and Shanghai CSI 300 rising by 2.0% and 2.2%, respectively. Consumer and technology stocks led the gains as investors welcomed the Politburo meeting's commitment to deploying more stimulus measures, focusing on boosting consumer spending and "counter-cyclical adjustments."

China's manufacturing activity contracted for the third consecutive month, with the official National Bureau of Statistics PMI Manufacturing Index falling from 49.5 in June to 49.4 in July, aligning with expectations and indicating further economic weakness. This heightens the pressure on policymakers to accelerate stimulus measures to support the economy.

💡 Upcoming Events: 💡

On Thursday, reports will be released on jobless claims, the ISM Manufacturing PMI, the final EU HCOB Manufacturing PMI, the final Japanese Manufacturing PMI, the Caixin Manufacturing PMI for China, and the S&P Global Manufacturing PMI for Malaysia.

By the end of the week, we will see the release of U.S. non-farm payroll changes and the unemployment rate.

💡 Things to Know Today: 💡

1. Meta $Meta Platforms, Inc.(META)$  reported strong Q2 2024 earnings, with revenue reaching $39.07 billion, a 20% increase that exceeded expectations. Despite heavy investments in AI and virtual reality, Meta maintained its spending outlook and reported high user engagement across its apps. CEO Mark Zuckerberg highlighted the robust performance and ongoing advancements in AI.

Meta

2. Mastercard Inc. $MasterCard(MA)$  announced strong Q2 2024 earnings, with adjusted net income reaching $3.3 billion, surpassing analyst expectations. Global purchase volumes grew by over 7% to $1.97 trillion, driven by strong consumer spending and increased focus on digital payments.

Mastercard

3. The Biden administration plans to expand foreign direct product rules, which will halt the export of semiconductor manufacturing equipment to Chinese chipmakers and restrict China's development of key chip fabs in AI and supercomputing. However, key allies such as Japan, the Netherlands, and South Korea will be exempted.

Biden Administration

4. HSBC $HSBC HOLDINGS(00005)$ , headquartered in London and deriving most of its revenue from Asia, announced a $3 billion stock buyback after reporting better-than-expected Q2 2024 results. Pre-tax profit grew 2% to $8.9 billion, driven by strong growth in wealth management and lower bad debt expenses.

✅ Key Takeaway:

Ahead of the Federal Reserve meeting, markets are looking for clear signals of a September rate cut. Although the Fed has indicated progress on inflation, no commitment has been made, leaving room for further data and future guidance.

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