- Mixed in Asia as Chinese PMI falls and Tokyo CPI rises.
- European markets weaken as core CPI moves higher.
- Amazon surge should boost US markets after volatile week.
A volatile end to the week in Asia has seen sharp declines in Chinese stocks, with the Hang Seng losing 1.4% and Shanghai down 0.8%. Notably, the US-China trade deal has already started to see cracks, with the Chinese stating that they will only buy Soybeans at the “market price.” Is this a case of them finding a reason to purchase less than agreed if they can show that another supplier will offer the product at a lower cost? Meanwhile, the latest manufacturing PMI out of China saw a decline further into contraction territory, falling to the joint lowest level since mid-2023 (49.0). Meanwhile, the Japanese Nikkei 225 index posted yet another 2% gain, rising above 52,000 to close out a month that saw the index rise over 16%. On the data-front, the Tokyo inflation rate rose from 2.5% to 2.8%, highlighting the troubles faced by the Bank of Japan. Nonetheless, while we saw higher than expected unemployment and lower retail sales, Japanese traders remain in confident mood as tech stocks continue to push the index higher.
European markets are on the back foot in early trade, with the FTSE 100 leading the declines as we close out a week that has seen major volatility from a plethora of key announcements. Coming off the back of yesterday’s ECB rate pause, this morning saw the latest inflation release dominate as core CPI rose unexpectedly to 2.4%. Coming off the back of comments from ECB member Martin Kocher that he sees inflation around 2% for the next two-years, todays core rise shouldn’t provide much concern for those worried about an inflationary resurgence in the eurozone.
US futures point towards a strong close to the week, with blockbuster earnings from Amazon (+12%) providing a welcome boost. Despite many overlooking Amazon as a core AI play, they posted huge numbers related to their artificial intelligence investments associated with the AWS cloud business. While tariffs clearly provide a headwind for the ecommerce business, the $33bn AWS revenues seen for the quarter means their core product is growing at levels not seen for years. Today sees the oil & gas industry come into focus, with ExxonMobil and Chevron both announcing their latest numbers before the US open. Despite Trump’s “drill, baby, drill” policy, his efforts to drive down energy prices will undoubtedly prove problematic for earnings in a world of $60 crude.