(Reuters) – A look at the day ahead in Wayne Cole’s European and global markets.
The big question of the day is how investors will react to Tesla’s announcement on Sunday that it delivered a record 466,000 vehicles in the second quarter, beating market estimates of around 445,000.
The outperformance may have been due to discounting, which is not good for margins, but analysts continue to rave about the numbers and send stock prices ever higher.
Back in the real world, China’s Caixin/S&P Global manufacturing survey showed a slowdown to 50.5 in June, but it wasn’t as bad as the 50.2 had feared. Chinese blue chips are a bit firmer, perhaps on hopes that a new chief at the central bank will provide stronger stimulus.
The People’s Bank of China has pushed back against a weaker yuan again by pricing the currency well above expectations, but these official fixings are having less and less impact on the market and offshore dealers are testing to see if Chinese banks actually sell dollars to support the yuan.
News that US Treasury Secretary Janet Yellen will visit China July 6-9 was seen as another sign that the two powers were trying to unfreeze their relationship, although expectations were far from high.
Some of the Nikkei’s recent big gains appear to be due to speculation that Japanese industry will benefit from a US decoupling from China, particularly in technology. Of note, Japanese chip shares jumped last week as Washington reportedly restricts sales of AI equipment to China.
The European Union is also moving to deepen cooperation with Japan on semiconductors, as the countries seek to tighten control over vital technology for defence, electronics and automobiles.
The Bank of Japan’s latest Tankan survey of large corporations found sentiment improving to plus 5 from plus 1, which is promising for a country where pessimism has taken hold.
The services index hit its highest since mid-2019 at plus 23, suggesting upbeat domestic demand, perhaps partly thanks to the influx of tourists into the country.
Yet companies still expected inflation to decline to 2.6% in a year from 2.8% in the previous survey, supporting the BOJ’s reluctance to back away from stimulus measures. super easy raises.
The US ISM manufacturing survey is expected later to have remained lackluster around 47.0 in June, but the services survey will be more important given the surprising slowdown in May. The median forecast is for a rebound to 51.0 and anything lower will fuel talk of payroll downside risk on Friday.
Key developments that could influence markets on Monday:
– European Central Bank policy chief Joachim Nagel speaks at a financial conference
– ISM US manufacturing survey, PMI and June auto sales. Equity and bond markets close earlier
(By Wayne Cole; Editing by Christopher Cushing)