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Focus on the pre-Fed balance sheet on global markets

Global markets focus on data, balance sheets and company news announced in the United States ahead of the Fed’s decision.

Wall Street indexes, which were mixed on the first trading day of the week, fell on news from Walmart on the new day. While the S&P 500 closed the day with an increase of 0.13% and the Nasdaq 100 with a loss of 0.55%, losses close to 0.4% are in effect on these futures contracts.

In Asia, on the other hand, an increase is observed with the support of Chinese technology stocks. While the MSCI Asia Pacific index was up 0.32%; The Hong Kong Hang Seng index rose more than 1%, while China’s CSI 300 rose nearly 1%.

The news that Alibaba will apply for a primary listing in Hong Kong, paving the way for Chinese investors to buy Alibaba shares directly, is effective in boosting Chinese tech stocks.

The yield on US 10-year bonds is close to 2.79%. The Bloomberg Dollar Index, which is near its lowest level since early July, is also stable at 1.275.

The Bloomberg Commodity Index, which rose 1.33% on the first trading day of the week, also rose 1% this morning. The US crude oil futures price also rose 3.4% in two days and hit the $98 limit.

Although Morgan Stanley said the oil market tightening continues, it lowered its oil price forecast for 2022 and through mid-2023 in anticipation of weaker demand.

Balance sheets are at the center of the markets in the USA

As the Fed’s interest rate decision to be announced on Wednesday and U.S. growth numbers to be announced on Thursday continue to be the most important item on the agenda in global markets, the debate continues on whether the US economy will enter a recession.

Although an average growth of 0.4% is expected on a quarterly basis in the second quarter in the Bloomberg survey, the possibility of a contraction in gross domestic product is not ignored. Of the 63 economists surveyed, 20 believe that GDP contracted in the second quarter.

On the other hand, although the US economy, which contracted by 1.6% in the first quarter, has had negative GDP for two consecutive quarters, it is also controversial whether this qualifies as a recession. Because, contrary to general opinion, the negative balance of GDP in the USA for two consecutive quarters is not officially considered a recession. The National Bureau of Economic Research considers the definition of “a two-quarter contraction is a recession” to be “simply” and “misleading.”

Meanwhile, US President Joe Biden said on Monday he does not expect a recession. Brian Deese, director of the US National Economic Council, said the US economy added more than a million jobs in the second quarter and there was no increase in employment in the recessions known to date. However, some data released yesterday showed signs of weakening. The Dallas Fed’s manufacturing activity index for July came in at -22.6, versus expectations for -18.5. The Chicago Fed National Activity Index for June was also at -0.19. The expectation was at the 0 level. The data for May was also revised and moved back into negative territory.

The world’s largest retailer Walmart, which is weeks away from publishing its balance sheet, said it expects earnings per share to fall 13% in the current fiscal year as high inflation negatively affects demand, the company’s shares fell as much as 10% in futures. Shares of Target and Amazon also fell with the statement.

According to Citi, corporate earnings are better than worries as US consumer spending is resilient and the worst news is already priced in. Unlike many companies, Citi expects corporate earnings to be strong in the face of a recession and a strong dollar.


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