Read the top 10 stories to remember the week which ended July 23rd.
#1: US stocks rebounded from a sharp sell-off, but it’s mostly tech
US stocks managed to end the week higher, rebounding from the Monday sell-off. We ought to note that most of the advance can be attributed to technology and more specifically FANG+ stocks. Growth shares kept outperforming value stocks for the fifth consecutive week. Trading volumes were also relatively low, at their second-lowest level since the beginning of the year
#2: Delta variant is hurting the global sentiment
There seems to be a growing fear regarding the progression of the delta variant. Iceland had to reimpose restrictions as cases exploded even though 75% of their population was vaccinated. Many countries saw their hospitalization rate go up. This rather bearish environment is not great for stock markets. Stocks tied to the reopening of the economy, such as cruise operators and airlines, fared particularly poorly. Oil price also suffered from a decline, hurting energy stocks. The major U.S. stock indexes dropped around 1% to 2% on Monday amid growing concerns around the issue.
#3: Promising earnings in the US!
As of Friday, 88% of the S&P 500 companies that reported their second-quarter numbers exceeded analysts’ estimates, according to FactSet. This rate – called the ‘beat rate’ – is above the 75% average of the past 5 years, and at its highest ever since FactSet began recording this data in 2008. Note that these are from results of only 24% of S&P 500 companies, so there remains room for change.
#4: Continuously sinking yields
Yields kept going down as the prices of government bonds keep getting more expensive. The 10-year U.S. Treasury bond yield sank on Monday to about 1.19%, its lowest level in five months, and finished the week at 1.28%. It was all the way up at 1.74%, not so long as March.
#5: European shares are doing well
EU share prices keep rising as the ECB confirmed they would maintain their rather dovish monetary policy. This statement certainly helped in reassuring the public as many were starting to be concerned with the delta infection surged. The pan-European STOXX Europe 600 Index ended 1.49% higher. The main European stock indexes also gained, with France’s CAC 40 Index up 1.68%, Italy’s FTSE MIB Index advancing 1.34%, and Germany’s Xetra DAX Index adding 0.83%. The UK’s FTSE 100 Index ticked up 0.28%.
#6: Europe keeps opening despite infection surge
The number od cases climbed 40% over the past week in the UK, but Europe keeps opening, nevertheless. The French government said that it could not rule out the reimposition of curfew measures if infections continue to climb at such a fast rate. Several regions in Spain are requesting the reintroduction of restrictions, while the country’s top court ruled that the lockdown which happened last year went against the country’s constitution.
#7: Olympic Games might not be a gift for Japan
Japanese stocks closed in negative territory on Wednesday, preceding the long weekend where that Tokyo Olympics started. The Nikkei 225 Index was down 1.63%, and the broader TOPIX Index fell 1.44%. There is a growing concern that Olympic games might worsen the country’s financial state, adding to the already crushing weight of the Covid-19 outbreak. The yield on the 10-year Japanese government bond fell to 0.016%, while the yen depreciated slightly to 110.45 against the U.S. dollar.
#8: China recorded mixed results, and keeps eyeing US listings
Chinese stocks remained relatively stable, with the Shanghai Composite Index rose 0.3% and outpaced the large-cap CSI 300 Index, which declined 0.1%, according to Reuters. The country’s regulators keep encouraging companies to list on the Honk Kong Stock Exchange instead of the US, keep their scrutiny on Chinese companies about to list in the US while easing restrictions locally.
#9: A new challenge for Chinese education stocks
China's private education firms are bracing for a "material" hit to their operations after Beijing announced new rules barring for-profit tutoring in core school subjects to ease financial pressures on families. News of the rule changes on Friday sent shockwaves through China's $120 billion private tutoring sector and triggered a massive sell-off in the shares of companies including U.S.-listed TAL Education Group and Gaotu Techedu. In early Monday trading on the mainland, the education industry sub-index dropped 7%, while shares of New Oriental Education & Technology Group Inc fell 40%.
#10: Netflix: subscriber growth but underwhelming EPS
Netflix (NFLX) saw revenues rising slightly to $7.34 but EPS came in at $2.97 below an expected $3.14 while subscriber growth blew up to 1.54 million compared with 1.12 million. Q2 was quite nice for the streaming giant, but unfortunately, not good enough. But Netflix is preparing new growth efforts in merchandise stores and the gaming industry.