Global Markets Report - 1 August

Australia

Australian shares are heading up this morning following a strong session across global markets. Data on China’s manufacturing sector beat expectations, sending Asian stocks higher. US shares also rose, as companies continued to report strong Q2 results.

ASX futures were 15 points or 0.2% higher as of 6:00am on Tuesday, indicating a positive open.

The S&P 500 rose on the final trading day of July, notching its fifth consecutive month of gains and its longest winning streak since 2021.

The S&P 500 and the Nasdaq added 0.2% on Monday. The Dow Jones Industrial Average rose about 100 points, or 0.3%, boosted by shares of Chevron and Walt Disney. Canadian stocks also finished higher, with the S&P/TSX Composite gaining 0.5%.

The monthslong rally in the stock market broadened this month, lifting everything from smaller regional banks to the biggest technology companies in the world, a sign that many traders expect continued strength in the US economy.

In commodity markets, Brent crude oil gained 0.7% to US$85.56 a barrel while gold added 0.3% to US$1,965.62.

Australian government bonds were slightly lower, with the 2 Year yield declining to 3.93% and the 10 Year yield edging down to 4.06%. US Treasury notes were mixed, with the 2 Year yield dipping to 4.88% and the 10 Year yield edging up to 3.96%.

The Australian dollar advanced to 67.12 US cents from its previous close of 66.46. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, edged up to 96.32.

Asia

Chinese shares ended higher thanks to stronger-than-expected manufacturing data and measures by the China State planner to support consumption. "China's official Manufacturing PMI surprisingly improved in July to 49.3, from 49.0 in June, reflecting stronger domestic demand," explained economists from Mizuho in a note. Retailers and auto makers led the gains. Furniture maker Easyhome New Retail gained 3.8% and Great Wall Motor added 4.9%. Shares of developers rose after major Chinese cities including Beijing and Shenzhen vowed to better meet the public's growing housing demands. Seazen increased 0.9% and Gemdale gained 2.0%. The benchmark Shanghai Composite Index closed 0.5% higher at 3291.04. Both the Shenzhen Composite Index and the tech-heavy ChiNext Price Index increased 0.8%.

Hong Kong Shares ended higher, with investor sentiment lifted by China's stronger-than-expected PMI data and the consumption support measures unveiled by the state planner. Gains were broad-based, led by consumer services and non-energy mineral companies. Restaurant chain Haidilao International was up 12% after guiding for a surge in first-half profit. Aluminum maker China Hongqiao Group rose 5.2% and clothing manufacturer Shenzhou International climbed 3.9%. Among losers, Country Garden Holdings fell 6.5% after guiding for a first-half loss. Country Garden Services declined 8.1%. The benchmark Hang Seng Index rose 0.8% to 20078.94 and the Hang Seng Tech index gained 1.9%.

Japan's Nikkei Stock Average surged 1.3% to close at 33172.22, boosted by companies recording strong results. Toyota Tsusho climbed 9.9% after it raised its fiscal-year net-profit forecast. Kansai Electric added 3.8% after it posted a 1Q net profit, compared with a loss a year earlier. Meanwhile, Fanuc slipped 7.3% after cutting its fiscal-year revenue and net-profit views.

India's benchmark Sensex index resumed its rally after two sessions of declines, closing 0.6% higher at 66527.67. Investor sentiment was lifted by cooling inflation across the globe and a possible end to the Federal Reserve's rate hiking cycle. "Energy and industrial stocks led gains. NPTC was 4.0% higher, in its 10th straight day of gains, marking its longest winning streak in over seven years. Tata steel climbed 2.2%, while JSW Steel rose 1.4%. Financial and consumer goods stocks broadly fell, with Asian Paints (India) down 0.4% and Bajaj Finance declining 1.1%.

Europe

European stocks mainly rose after upbeat trading in Asia and ahead of an expected higher US open. The pan-European Stoxx Europe 600 gained 0.2% and the French CAC 40 climbed 0.3%, though the German DAX dipped 0.1%.

The United Kingdom’s FTSE 100 index edged 0.1% higher to 7699 points, a two-month high amid positive trading in global markets. Oil-exposed stocks and miners led gains amid indications that Chinese policymakers are looking to boost their country’s economy in the coming weeks, CMC Markets analyst Michael Hewson said in a note. British Airways owner International Consolidated Airlines outperformed the British index, closing up 3.6%, followed by Centrica and Weir Group, up 2.9% and 2.5% respectively. Among the top fallers, Rolls-Royce shares closed down 4.4%, while retailer Ocado slipped 3.9%.

North America

The S&P 500 rose on the final trading day of July, notching its fifth consecutive month of gains and its longest winning streak since 2021.

The S&P 500 and the Nasdaq added 0.2% on Monday. The Dow Jones Industrial Average rose about 100 points, or 0.3%, boosted by shares of Chevron and Walt Disney. Canadian stocks also finished higher, with the S&P/TSX Composite gaining 0.5%.

The monthslong rally in the stock market broadened this month, lifting everything from smaller regional banks to the biggest technology companies in the world, a sign that many traders expect continued strength in the US economy.

"The market has fully embraced the soft landing scenario," said Bryant VanCronkhite, a senior portfolio manager at Allspring Global Investments.

A stretch of better-than-expected data on jobs and inflation has pushed traders to unwind some of their bets on a looming downturn. Some have ditched their gloomy forecasts on stocks and abandoned recession wagers, helping push swaths of the stock market higher alongside bond yields.

Gains in regional bank stocks such as Zions Bancorporation pushed the KBW Nasdaq Regional Banking Index up 18.3% for the month, its best stretch since November 2016. These stocks were battered earlier in the year, when Silicon Valley Bank's collapse stoked a banking crisis and exacerbated worries about a looming recession.

Energy companies ripped higher in July, with stocks such as Schlumberger and Halliburton gaining around 18% apiece for the month. Meanwhile, tech stocks continued a winning streak that has helped send the Nasdaq up 37% for the year, besting the Dow by its widest margin through July of any year on record, according to Dow Jones Market Data going back to the 1970s. The Dow is up 7.3% year to date.

On Monday, fresh data showed that Texas manufacturers expect general business activity to expand in the next six months. Expectations for capital expenditures to rise also jumped to the highest levels since the middle of last year. Later this week, traders will be watching the monthly jobs report for more clues on the economy.

Investors have also been sifting through a wave of earnings results, many of which have been better than initially expected by Wall Street analysts. Around 81% of companies have been beating earnings estimates, the highest figure of the past seven quarters, according to Société Générale. Now, analysts forecast that second-quarter earnings will mark a trough for quarterly results before a rebound in profits later this year, according to DataTrek Research.

Later this week, traders will be parsing results from two of the biggest companies in the world, Apple and Amazon.com. Investors have piled into tech behemoths in a wager that they will benefit from a boom in artificial intelligence.