The S&P500 and Nasdaq retreated. But the S&P500’s equal weight index advanced to a record high and the Dow Jones industrial index hit a fresh ATH, as well. Nvidia fell more than 2% a few hours before its earnings announcement, while Roundhill’s Magnificent 7 index retreated 1.34%.

Data-wise, the durable goods orders jumped nearly 10% in the US in July, while ex-transport data stalled – in line with the actual rhetoric of slowing US economic growth that should justify the beginning of the Fed rate cut in September.

The Fed rate cuts should provide an ideal environment for a further rotation from the Big Tech companies toward the non-tech sectors at a time when the earnings of the Magnificent 7 companies slow (they slowed to post a probably 34% growth last quarter  - we will have the exact number after Nvidia earnings - from above a 40% growth recorded over the past year), while the earnings at the rest of the S&P500 rose by 6% last quarter from the negative territory. As such, the fundamentals are supportive of a further convergence between the tech and the non-tech pockets of the market. The problem with that is, the tech is a major boost to the S&P500 index. Nvidia alone can move the S&P500 by around 1% in a session.

FX & Commodities

The US yields and the dollar rebounded on Monday. The EURUSD retreated to 1.1150 and settled a bit higher than that in Asia. Cable consolidates a touch below the 1.32 level as the USDJPY trades near the 145 mark, though the Bank of Japan’s (BoJ) core CPI figure came in softer than expected this morning, and showed that inflation as calculated by the index unexpectedly fell from 2.1% to  1.8%. In Canada, the USDCAD sank below the 1.35 for the first time since April, helped by a rally in crude oil prices due to rising tensions in the Middle East.

On top, the news that Libya’s eastern government – which is internationally unrecognized – said that it’s shutting down oilfields in response to ‘attacks on the leadership and employees of the Central Bank of Libya’. The eastern government produces around 1mbpd – which a substantial portion of Libya's overall production. Consequently, US crude was up by 3% yesterday, and around 8% in three sessions. The price of a barrel is testing the 200-DMA to the upside – where it sees strong resistance. The $78/80pb range is home to offers that could be cleared with mounting tensions of all sorts, yet the slowing global growth worries will likely keep the upside limited above this range in the medium run.

China troubles

In China, the market selloff continues; the CSI 300 index trades at the lowest levels since February. Canada announced that it will impose tariffs of 100% on Chinese-made EVs and 25% on steel and aluminium to protect its domestic manufacturers. The mining company BHP’s CEO warned of higher volatility in global commodity markets due to the Chinese woes, and said that the iron ore supply will outpace demand into next year as surplus steel floods the market. Iron ore futures are struggling near the pandemic low levels.

Other than that – still in the context of geopolitical shenanigans - IBM said that it will shut its R&D department in China – also due to the mounting tensions between Beijing and Washington. If that’s not enough bad news, their e-commerce giant PDD – the owner of Temu – plunged nearly 30% on Nasdaq and recorded its biggest one-day lost ever, after the company warned of slowing sales as the competitors like Alibaba also increase efforts to attract budget-aware customers.

Zooming out, KraneSahres CSI China internet ETF posted its worst weekly outflow in 2 years, as investors moved money into EM bonds on Fed rate cut bets. As such, JP Morgan’s USD denominated EM Bond ETF rose to the highest level this year and has room for a further rally – as it trades with about 23% discount compared to the pre-pandemic times.