Monday, August 10, 2015
The major indexes appear poised to start today’s session in the positive, likely reflecting greater odds of Chinese stimulus following overnight weak economic data from that country.
China’s July trade data over the weekend showed that momentum in the country’s economy continues to slide in the second half of the year. Exports for the month were down -8.3% from the year before, reversing the +2.8% gain in June. Imports were down for the 9th month in a row, dropping by -8.1% in July following the -6.1% drop in June. In the first 7 months of the year, exports are now down -0.8% in U.S. dollar terms, while imports are down -14.6% in that time period, according to the Wall Street Journal.
Weakness in the trade data, coupled with a separate wholesale inflation reading, which also came short of expectations, is expected to add to pressure on the Chinese authorities to come out with more fiscal and monetary stimulus measures. It is these stimulus hopes that pushed Chinse stocks to their best one-day gain in over a month on Monday. But these hopes aren’t shared by the global commodity markets, with the recent renewed weakness in oil reflecting the commodity’s soft demand backdrop largely due to China’s uncertain outlook.
On the home front, the focus of this week’s relatively sparse data docket will be on the consumer, with the July Retail Sales numbers coming out on Thursday and the results from retailers as the only piece of remaining interest in the Q2 earnings season. The Retail Sales report is expected to show strong gains this month following the relatively soft run the last couple of months. Last week’s auto sales numbers were particularly hot, but the expectation is for July Retail Sales to show positive momentum even without the automobile data. Macy’s (M) and China’s Alibaba (BABA) are the key retail sector earnings reports this week that will give us clues about the state of the consumer in both of these key markets.
Sheraz Mian
Director of Research
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