Its been a mixed start to trade on Monday, with Chinese data initially giving a boost to the basic resource sector and sentiment on the whole.
The data was a mixed bag which may explain why it took a little time to settle in. On the one hand, the country has experienced it’s slowest quarter of growth in 27 years, on the other we saw some encouraging beats on the accompanying releases.
This was particularly true of the industrial production number which was more than 1% higher and is giving a boost to basic resource stocks. Ultimately, the trade war is clearly taking its toll but importantly, the slowdown is being managed well at the moment which is perhaps a relief. Of course, things could still get better before they improve so we have to bear that in mind.
Earnings recession to add to Q2 gloom
Stock markets may be at record highs in the US but there’s a very different feeling going into this earnings season than we’ve experienced the last few years. After a year of incredible earnings growth, we’re now facing down the barrel of an earnings recession, with a drop of almost 3% expected.
That will only further support the case for rate cuts from the Federal Reserve, especially if second quarter growth turns out to be as bad as people fear. We kick things off with focus on the banks this week which should offer some great insight into the economic outlook and impact of lower interest rates to come on earnings.
Bitcoin threatening to break below $10,000
It’s been a rocky few days for cryptocurrencies. First Powell lands a blow while facing questions on Libra in Congress and then Trump piles in on Twitter, claiming not to be a fan. This was followed over the weekend with reports of a $32 million theft from a crypto exchange and arrests at a Chinese mining firm to further pile misery on the space.
The result has been a more than 10% decline and has seen pressure building on the $9,500-10,000 area. A lot of this is being attributed to Trump’s comments and may become more severe if the attacks are repeated, as they often are. If so its a bit of a slow burn, given that initially bitcoin only fell around $500 and then quickly rebounded.