Global Factors Shape August Markets

Weak August continues

The downtrend in equities continued as the S&P500 fell for the sixth day in August out of the seven days so far. The index is down 2.64% this month whilst the Nasdaq is down 4.17% in the same period. The S&P futures are trading just above support at 4490 with the next level at 4405. The Nasdaq closed down 112bp yesterday with the high-flying shares of Nvidia (+191% YTD) under pressure after the announcement of a new chip yesterday failed to spark the share price. Fears of supply issues caused a 4.7% drop in share value with the company trading at 40x trailing price-to-sales.

US CPI now the key indicator

Pre-Covid all eyes used to be on the NFP as the lead indicator of the state of the economy, now CPI has taken up that mantle. MoM estimates are for a figure of +0.2%. The consensus is a figure of +0.1% or lower will most likely see risk assets push forward with yields falling and equities rising. A figure of +0.3% or higher is harder to read as it will only take the YoY figure to 3.4% (expected 3.3%) which is not alarming. The effect of oil’s recent rally (+16% month-to-month) cannot be underestimated as to what affect it has on the figure and how it is perceived.

European Gas fires up

European gas prices rose as much as 40% yesterday before closing +28% on the day. The move higher in energy prices were a strong contributor to weakness in bunds as the short end sold off on a potential reaction from the ECB to higher energy inflation. The move up was caused by concerns about dwindling LNG flows, which outweighed the fact that gas storage is at record levels.

Disney rises as cost cuts and strikes produce saving.

Disney was up around 4% after-hours are erasing initial post-earnings declines after announcing capital spending and outlays for films and TV shows are coming in lower than expected. Disney expects content spending this year to be about $27bln, lower than the expected normal of $30bln.

The savings as partly because of the strikes in Hollywood and all of this led to an EPS of $1.03 per share, beating the expected $0.99 per share. Subscribers to Disney+ dropped 7.4% to 146mln from the previous three months, most of this caused by Hotstar in Asia which failed to renew streaming rights to the Indian Premier League cricket.