New highs for US stocks; Bitcoin drops to $10k

Summary:

• Wall St. rises to now ATH

• Citi beats on earnings

• Chinese growth slows to near 30-year low

• Bitcoin tumbles as investors digest trump’ words

Equities have made a pretty solid start to the week despite the drop in Chinese GDP that was announced overnight with the S&P500 moving above the 3020 level to post another fresh all-time high. The economic calendar was pretty light today with the only data out of note since the Chinese figures being the Empire Fed manufacturing index. This reading for July came in above forecasts, with a print of +4.3 in excess of the 2.0 consensus forecast and marking a pleasing bounce back from the -8.6 seen last time out. The contraction in manufacturing readings in recent months has caused some concern but the recovery in the latest New York state figures is a welcome recovery after the June reading showed the lowest level since October 2016. 

Citigroup has kicked off earnings season in earnest this lunchtime with the firm the first major bank to report their Q2 results. On the whole there’s quite a lot to like about the update with the figures beating the street on both the top and bottom line. If Citi’s performance serves as a harbinger of things to come, then the pretty pessimistic forecasts going into this set of corporate earnings could be overly negative and allow for several upside surprises. The bank earned an adjusted $1.83 per share on revenues of $18.8B, against $1.63 and $18.5B for the same period last year. According to Bloomberg, analysts on average expected Citi to post $1.80 per share on $18.5B revenue. The increase in revenue has been attributed in part to a $350M pre-tax gain on its investment in electronic trading platform Tradeweb, which recently went public. The stock trades marginally higher on the European close. 

The pace of growth in the world’s second largest economy has slowed to its lowest level in almost 30 years with Chinese GDP for the second quarter falling to +6.2% year-on-year. This is the lowest reading since 1992 and with most of the weakness coming from exports it appears that the ongoing trade tensions with the US are taking their toll. While the slow down is clearly not good news, it had been widely expected and as such came as no surprise. Traders seemingly focused more on the latest industrial production and retail sales figures which were released simultaneously with the GDP data and both beat forecasts. There was little by the way of an immediate adverse market reaction as Chinese stock benchmarks actually ended the session in the green with the CSI 300 index closing up by 0.9%. 

Major cryptocurrencies saw substantial declines over the past weekend as investors were digesting harsh words of US President Donald Trump regarding digital coins. Let us recall that he underlined that he was not a fan of Bitcoin and other cryptocurrencies suggesting they were not money and were based on thin air. After the gloomy weekend, the declines have been extended into the new week with Bitcoin trading lower by as much as 14%. The market briefly dipped to the $10,000 mark before buyers stepped in and provided support and this big round psychological figure could be worth keeping an eye on going forward.