On top of the usual European-centric worries about Spain and
Greece, today's trading action will likely also reflect the outlook
downgrade for Germany by a rating agency. There is nothing
imminent in the outlook downgrade, but it is nevertheless a
reminder that the region's fiscal woes have consequences for its
strongest economy as well.
Beyond Europe, we have a relatively reassuring read this morning
on China's manufacturing sector, indicating that the country's
factory sector may not be in free-fall.
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On the earnings front, results from
) -- two key bellwethers for the global economy -- confirm the
trend that we have seen repeatedly this earnings season: the growth
picture is cloudy, prompting companies to be cautious if not
altogether negative in their guidance.
), which reports after the close today, is believed to be immune
from these earthly concerns… or is it? We will sure find out later
today, but the company is no doubt in a league of its own.
The China news is definitely on the reassuring side, with the HSBC
China Manufacturing Manager's Index for July coming in at 49.5, up
from June's 48.2 reading. Just like the ISM readings in the U.S.,
below-50 readings indicate contraction in the sector, but the
improvement from the prior month indicates that the outlook for the
country's factory sector may be on the mend. This is the highest
level for this closely-watched index in five months and could be
indicative that the country's monetary and fiscal easing measures
are starting to have an impact.
Some caution, however, is warranted. First, this the 'preliminary'
version of the monthly HSBC PMI, reflecting less than complete
response rates from survey participants and can get revised in the
'final' version. Second, despite the improvement the measure still
shows the country's factory sector in contractionary territory for
the ninth straight month. These caveats aside, the measure could be
indicative of the long debated 'soft landing' scenario if sustained
in the coming days.