Beat the Street: US outlook, Goldman Sachs, China data, ARM
Investors turn their attention to the US economy as we await inflation data, amid concerns about a looming economic downturn in China, the world’s second-biggest economy.
US industry hit by rising yields, weaker Chinese data
Hello, I'm Angeline Ong, and welcome to this new edition of Beat the Street, the show that gives you all the tradeable news and data that you need ahead of the Wall Street Open.
Coming up, US industries show signs that they are set to fall on rising yields and weaker Chinese data. And, also, taking a look at the US after Goldman Sachs cut the chances of a US recession. More on that in a moment. And SoftBank's chip designer ARM aims to raise up to $4.87 billion in its US ICO.
A warm welcome to you, I'm Angeline Ong, and this is Beat the Street, not long before Wall Street starts trading. Let's take a look at how equity markets are looking as we count down to the Open.
It must be said that we are looking at futures indicating a lower Open, futures weighed by higher Treasury yields, which in turn have hit growth stocks. Whilst the slow expansion, the rate of expansion in services activity in China is stoking worries about demand from the world's second-biggest economy.
US tech stocks creeping back up
The S&P 500 also, let's just take a look at that, ending slightly higher after. Let's take a look at the US tech first, because we're seeing a similar trend there. It's come off slightly since July, but is creeping back up again for the last few days.
Let's take a look at the SPX, which is also one that we have been watching. And on the platform, it is known as the US500. And this has a similar trendline to the Nasdaq as well, at highs they're seeing in July 4597, before it starts traversing lower to around mid-August where it hit 4370.
But it seems to be coming back now, it must be said, and as more and more traders come back online and investors come back from their summer holidays, we could see more liquidity come into the market.
Services hit by weak environment
Of course, everyone is waiting on the factory and durable goods data out later in the session. Also, global business activity has largely slowed further last month as services companies struggle in the face of weak consumption, rising prices and also borrowing costs, which are still high, and an indebted consumer. All this is playing into a weak environment.
In the Euro Zone, we had numbers from Germany, its services sector contracted for the first time this year. France has shrunk more than first estimated. Asia surveys for August also were downbeat with China's services activity expanding at the slowest pace in eight months. More on that in a moment.
Will the Fed turn dovish?
Of course, the Federal Reserve Bank (Fed) outlook is what everyone's looking out for. And Keith Buchanan, portfolio manager from Global Investment, says: "The data makes the case for the Fed becoming more dovish as we head into the fall. If the end of tightening comes sooner rather than later, this could all lead to a substantial rally in stocks."
AO: This expectation, of no more Fed hype, is helping investors to remain slightly optimistic. For more on this, let's cross over to IG's chief markets analyst Chris Beecham.
CB: US cash markets return from their long weekend this afternoon. It's essentially a fairly muted open, but there are signs maybe the futures are recovering on fates that the Fed won't have to hike again this year.
Equities gunning for a Happy New Year
And it all goes back to last week's payroll data, especially that rise in the unemployment rate. And that's giving hope maybe that equities can see a stronger end to the year as well as traditionally strong Q4 seasonality takes over once we get September out of the way.
The big risk remains that rise in oil prices and a surge in inflation, but at the moment expectations are that we won't see another Fed rate hike this year.
AO: One thing to watch out for, Goldman Sachs has cut the chances of a US recession. In the next 12 months to 15%, this is from 20% and comes amid continued easing, inflation, it says, and robust labour market data.
Chinese services activity slowed to eight-month record
I want to quantify this and add this to the landscape as well. We did have this private survey out of China, which shows that services activity there slowed in August, rather than expansion, slowed to its slowest rate in eight months. This is on weak demand, weak consumption, and also further evidence that the stimulus there has failed to get consumers spending.
China's services activity was one that actually pushed down US-listed shares of Chinese companies, including Pinduoduo (PDD.O) and also Baidu, just showing you the chart here, because Baidu is all-sessions, and it has actually come down since that data, down 1.3%.
Also checking in on Alibaba for you, because this is another keenly watched stock, which is all-sessions as well, and that is also lower. Among other stocks that we are watching as well, Airbnb and Blackstone, which I have here for you.
Just showing you Airbnb first, because Airbnb shares are all sessions too, and it's looking like it's marching higher there ahead of the open, because of the expectations that both Airbnb and Blackstone are set to join the S&P 500.
All eyes on rising Oracle
Also, we're watching Oracle as one of the ones to keep an eye on, because Oracle, all sessions as well, was gaining ground, and it's still up there, as you can see, up 1.7% all-sessions after Barclays upgraded the software firm to overweight from equal weight.
Aussie gas workers set to down tools
Meanwhile, in the energy and gas sector there is no deal in sight yet between Chevron and unions in Australia. Workers at Chevron's Gorgon and Wheatstone liquefied natural gas (LNG) project in Australia are still planning a total strike for two weeks from September 14, says a union alliance.
No one's saying yet that there will be an immediate impact on the market. Many traders are starting to worry about longer-term disruption. Australia is, of course, the world's biggest LNG exporter.
Now just taking a look at what the union alliance said on Facebook, the offshore alliance is escalating protected industrial actions to demonstrate that our bargaining negotiations are far from, quote, intractable.
Softbank looking to raise $4.87m in IPO
And just want to update you on news just crossing not too long ago, Softbank Group are aiming to raise up to $4.87 billion in the chip designer's US initial public offering (IPO). This is according to a regulatory filing.
It's coming after Apple, NVIDIA, Alphabet, AMD and other customers of ARM Holdings having agreed to invest in the chip designer's IPO, reports Reuters. SoftBank hoping that once trading on shares will attract other investors.
Now before we go, let's have a last look at some other indices for you. Just taking a quick look at the volatility index, as you can see, they're still quite low, given the data, the mixed data that we've seen out of the US and out of Europe of late.
And also checking in on the markets ahead of trading, as I mentioned, all indicating a softer open ahead of the bell. And also oil is another one to watch out for, because both Brent and WTI have weakened slightly. But it must be said, they are still near highs, year to date highs there, as you can see.
Well, that's it for this edition of Beat the Street, the show that follows the trading action, helping you position yourself ahead of the opening bell. For more trading insights, do follow me on at IG.com and at Angeline Ong on Twitter. This is IGTV. Thanks.
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