A Reversal of Fortunes for US Banks and Technology Stocks

In the past two weeks, we have seen the latest Q2 earnings releases of the major US banks; JP Morgan, Bank of America, Wells Fargo, Citigroup, Goldman Sachs, Morgan Stanley, and one of the high-flying technology-related “Magnificent Seven”, Tesla as well as a Netflix. All the major banks beat earnings expectations except Goldman Sachs, but its disappointing earnings had been well-telegraphed by senior management in public speeches ahead of its result release.

A Week Packed With Earnings and Central Bank Decisions

Last week ended on a caution note after the first earnings from Big Tech companies were not bad, but not good enough to further boost an already impressive rally so far this year. The S&P500 closed the week just 0.7% higher, Nasdaq slipped 0.6%, while Dow Jones recorded its 10th straight week of gains, the longest in six years, hinting that the tech rally could be rotating toward other and more cyclical parts of the economy as well.

Most Important Task for Chair Powell and Lagarde to Provide Investors With Some 'Conditional Guidance'

Whatever the outcome, probably a big surprise is needed for markets to place strong directional bets on Fed and ECB policy beyond this week’s decision. In both cases a 25 bps rate hike is a ‘fait accompli’. Most important task for Chair Powell and Lagarde to provide investors with some ‘conditional guidance’ on what is most likely to happen in September.

Crypto Market Poised for Deeper Correction

The crypto market lost 1.8% to last week’s level of $1.192 trillion, spending most of its time within the $1.190-1.210 trillion range and near its lower boundary on Monday morning. The market has found its temporary equilibrium as it awaits the decisions of three major central banks – the Fed, the ECB, and the Bank of Japan – later this week. Their actions and comments will likely complete the market consolidation and set the trend for the coming weeks.

Yen Rebounds After Rough Week, US Manufacturing PMI Next

The Japanese yen has bounced back on Monday. In the European session, USD/JPY is trading at 141.27, down 0.40%. The yen declined on Friday by 1.2%, capping an awful week, with the yen falling 2.2%.

Sunset Market Commentary

The July European PMIs painted a bleak picture of the economy. They also all missed expectations. The composite indicator ventured deeper into contraction territory (48.9 from 49.9). Manufacturing is still leading the decline (42.7 from 43.4) with net job losses for a second month straight, a steepening loss of new orders (one of the steepest since 2009) and output at its lowest in 38 months.

Euro Retreats Inside Uptrend on Weak PMIs

The single currency fell against the Dollar on Monday, dropping to 1.1070 following the release of weak economic data. After losing for five consecutive sessions, the EURUSD has given back almost half of its gains from the 6th to the 18th, and the pair’s further momentum will largely depend on comments from the ECB and the Fed in the second half of the week.

EUR/USD and USD/JPY in Focus Post Flash PMIs; Bitcoin Falls Below $29.5k

The euro declined below the 1.1120 level against the dollar after European PMI data disappointed across the board.  It didn’t matter if you looked at eurozone manufacturing or service data, it was all ugly.  One of the reasons why the euro didn’t fall further has been the recent string of optimism being reflected by European firms.  Despite all the complicated macro backdrop and disappointing Chinese recovery, so far most EU companies aren’t too overly downbeat with the outlook.

ECB Preview

A 25bp rate hike from the ECB this week is essentially a given. This outcome has been well communicated in advance by most members, and should not in itself lead to any noticeable market reaction.

Will July Rate Hike Be One and Done for Fed?

After a short break in June, the Fed is expected to announce its eleventh rate hike on Wednesday at 18:00 GMT. Most analysts think this will be the last rate increase of the tightening cycle that began in March 2022, but they will seek confirmation and look for signs of a possible rate cut next year. If the Fed dismisses these rumors and takes more time to assess the effects from previous tightening, the greenback could still gain new traction.