Monday market minutes: Bulls hitting back

Global markets start a new month of trading with July’s performance the best for a month since late 2020.

Apart from Hong Kong and the mainland Chinese markets where the ham-fisted approach to controlling Covid and continuing attacks on business and tech companies produced yet another slide, major markets saw gains of 4% to 12%.

Chinese markets will come under pressure today after a surprise contraction in manufacturing activity in July instead of a modest rise.

Most of the stockmarket gains outside China gains came in the final two weeks of July as investors finally accepted that high inflation and rising interest rates were going to be a fact of life for a while yet.

Even with weak earnings from usual market leaders, a major profit warning from Walmart, Wall Street gained and ignored news of a second successive quarter of a fall in economic growth.

Why? Well, the recession America now finds itself in that isn’t a recession according to the American way characterising booms and busts.

After thinking the Fed has lost the plot, Wall Street is now convinced the Fed will save them from a slowdown by having to slow its aggressive rate after the US economy contracted for a second quarter in the three months to June.

That took the contraction for the first half of 2020 to an annual rate of 1.1%.

But the US definition for a recession hasn’t been met because of the boom in US jobs and that belief will be tested this Friday with the July employment data.

Wall Street no longer thinks its smarter than the Fed after the central bank whacked up rates by 1.5% in two meetings, even as inflation jumped to 9.1% in June.

The big rises – and now a hint of perhaps a slowing in that pace in coming months – was enough to bring the Wall Street doubters to heel and accepting of what the Fed is doing.

Major energy companies – Exxon, Chevron, Shell, Totalenergies and others produced record earnings – as expected – Apple and Amazon didn’t do as badly as many had feared – although Facebook did though for owners Meta Platforms.

Intel produced a howler of June quarter result and was passed in value by once smaller rival, AMD, as its shares slumped 8% or more on Friday and Alphabet and Microsoft revealed OK figures (even though the latter is now looking at a much weaker outlook than it was in May.

All of the major Wall Street measures enjoyed a winning week and their best month of 2022. The Dow rose 315.50 points, or nearly 1%, to 32,845.13 on Friday. The S&P 500 jumped 1.4% to 4,130.29, and the Nasdaq added 1.9% to end the day at 12,390.69.

For the week, the Dow ended higher by nearly 3%, while the S&P 500 and the Nasdaq Composite gained about 4.3% and 4.7%, respectively.

The Dow saw a 6.7% gain for July. The S&P 500 added 9.1% for the month. The Nasdaq, while still in bear market territory, is up more than 12%.

Those were the biggest monthly gains for all three indexes since 2020.

The ASX 200 is looking for a gain of more than 40 points when trading starts for August. It added 5.7% for July and 0.8% on Friday (closing at 6,945.20, the highest close since June 9. It added 2.26% last week.

Across the Tasman the S&P/NZX 50 index rose 1.5% to 11,492.65 on Friday, its highest close since May 6. The index added 5.7% in July, its best month since April 2020.

In Europe, the Stoxx 600 index added 1.3% on Friday and a very strong 6.3% for July.

Friday saw data showing the 19 EU economies had outperformed the US in the three months to June with a rise in GDP of 0.7%. Not brilliant, but better than America’s 0.9% contraction, especially as those know-all economists had forecast a contraction of 0.2% for the EU.

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Mainland Chinese and Hong Kong stocks ended lower Friday to post the biggest monthly drop in a year by the close Friday.

The reason for the outlier performance compared to other markets – the unholy combination of the zero-Covid policy of President Xi Jinping which is still whacking businesses large and small in many parts of China and Xi’s harsh ant-tech policies as he and his government seek to bring the only growth sector in the Chinese economy under tighter state control.

China’s blue-chip CSI300 Index fell 1.32% to 4,170.10 points, and it also lost 7% to book the biggest monthly loss since March.

The Shanghai Composite ended Friday’s session down 0.9% and 4.3% in July, thereby ending a two-month winning streak.

In Hong Kong, the benchmark Hang Seng Index dropped 2.26% to 20,156.51 points and dropped 7.8% for the month. That was the biggest monthly drop since July 2021.

Friday’s sharp losses in Hong Kong were led by major tech firms as investors worried about continued clampdown on the sector by Xi’s government after a Wall Street Journal report said Chinese billionaire Jack Ma planned to cede control of financial technology firm Ant in an effort to move away from affiliate Alibaba.

Hong Kong shares of Alibaba Group slumped 6.1% as a result.

Shares of China’s food ordering and delivery platform Meituan fell 6.2% after China’s Hangzhou market regulator said on Thursday it had summoned Meituan, Ele.me and other take-out delivery platforms over “vicious” price-cutting and poor regulation.

How very odd – Chinese companies are being attacked by governments at all levels for being ‘monopolies’ and ‘arrogant’ and setting prices too high, and now for cutting prices in what seems to be a very competitive marketplace.

Another internet gaming and social media giant – Tencent Holdings – also posted losses on Friday, losing 4.3% after a product made in South Korea was blocked in India because it was supported by the Chinese giant.

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And crypto currencies also joined in the rebound with Bitcoin rising 3.36% to $US24,584.24 at the weekend.

That meant has jumped 39.7% from the year’s low of $US17,592.78, hit on June 18. It’s also up from the $US20,108.53 level on June 30.

Ether, the coin linked to the Ethereum blockchain network, rose 0.61 % to $US1,734.08 on Saturday.