CFDs are complex instruments. 74% of retail client accounts lose money when trading CFDs, with this investment provider. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money. CFDs are complex instruments. 74% of retail client accounts lose money when trading CFDs, with this investment provider. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money.

Early Morning Call: China indices outperform while USD strength persists

Indices in China outperform as the PBoC cuts Loan Prime Rates. USD continues to strengthen ahead of the Jackson Hole Symposium. On the corporate front, Zoom will report Q2 earnings after market closes tonight.

Equity market overview

US equity markets ended the week on a negative note, with technology stocks leading losses, while it was a mixed session overnight in the APAC region.

China indices outperformed after the People's Bank of China (PBoC) cut its key rates for the second time this year, in an effort to revive an economy hit by a property crisis and a resurgence of COVID-19 cases. The Bank lowered its one-year Loan Prime Rate (LPR) by 5-basis points (bps) to a record low of 3.65%. The 5-year LPR, to which the pricing of home mortgages is linked, decreased by 15-basis points to 4.30%.

The move didn't come as a surprise. A Reuters poll conducted last week showed that 25 out of 30 respondents predicted a 10-bps reduction to the one-year LPR. The decision of a larger cut of the 5-year LPR makes sense according to economists’ comments, as it is meant to boost long-term financing demand.

This week, all eyes will be on Federal Reserve (Fed) chair, Jerome Powell. On Friday morning, he will deliver his 'Economic Outlook' speech at the 2022 Jackson Hole Economic Policy Symposium, which could give further indication as to how high US interest rates may go, and for how long.

For the moment, the market is still pricing Fed rates to peak at around 3.65% early next year, expectations that haven't changed in the last two weeks. But what has changed is the amount of rate cuts expected between March and December next year. Reuters data shows that rates are expected to go down by 40-bps during that period, down from 60-bps two weeks ago.

Forex markets

The dollar is little changed this morning, after strengthening against major currencies last week. EUR/USD remains close to parity, while GBP/USD is still close to its mid-July low.

Corporate news outlook

On the corporate front, Zoom Video Communications Inc is set to report its fiscal second-quarter (Q2) earnings after market closes tonight. Analysts expect earnings of 93 cents per share. For the same quarter last year, the company reported earnings of $1.36 per share. Revenue is forecast to rise by 9.4% to $1.12 billion.

While Zoom Video Communications thrived during the pandemic, consistently beating earnings and sales estimates every quarter, and continuing to raise guidance, the group is now struggling to maintain its pace of growth. It had to make strategic decisions and is now focusing on business customers who will make up an increasingly larger share of revenue. It is also selling technology solutions that improve meetings involving remote and in-office workers.

Otherwise, very few earnings reports of importance are expected this week. On Wednesday, NVIDIA Corp (All Sessions) is forecast to post earnings of 53 cents per share on revenue of $6.83bn, which is higher than the group's own revenue forecast.

Earlier this month, the largest US-based chipmaker warned that because of the slowdown in the PC market it won’t be able to meet its earlier revenue forecast. NVIDIA now expects revenue of $6.7 billion for the quarter, 17% below its previous forecast.

On Thursday a few retailers are due to report quarterly earnings, and one to watch out for is Gap Inc. Analysts anticipate a loss of 5 cents per share. Sales of the clothes retailer are expected at $3.82bn.

Commodities

Oil prices are down this morning, putting an end to three consecutive days of gains.

Last Friday, Baker Hughes said total rig count in the US decreased by 1 to 762, due to a decline in gas rigs in operation. Working oil rigs remained at 601.


This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Take a position on indices

Deal on the world’s major stock indices today.

  • Trade the lowest Wall Street spreads on the market
  • 1-point spread on the FTSE 100 and Germany 40
  • The only provider to offer 24-hour pricing

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.