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Dow, small caps enter the spotlight

Following weeks marked by relentless all-time highs by tech stocks, the tides appear to have turned, at least for the first days of the second-quarter earnings season. On Tuesday, the Dow Jones Industrial surged to another all-time high, while the small-cap Russell 2000 also spiked. The tech-heavy indices on the Nasdaq ended with little change, while European stock markets were down across the board. In Asia, trading was mixed with Australia’s S&P/ASX 200 hitting a new all-time high. Gold also hit a record midweek and was trading near USD 2470 per ounce.

Data
Autore
Shane Strowmatt, LGT
Tempo di lettura
5 minuto

Stock chart
© Shutterstock

In New York, the sentiment appears to have swung on stock markets in favour of old economy stocks with companies outside of the technology sector making the biggest gains in recent sessions. The Dow Jones Industrial hit another all-time high on Tuesday, closing 1.9% higher at 40,954.48 points. The S&P 500 gained 0.6%, also reaching a new all-time high, while the Nasdaq-100 was up just 0.1%.

The positive sentiment for the Dow was aided by stable retail sales data. In June, US retail sales remained unchanged as a decline in auto sales was balanced out by strong performance in other sectors. May's sales figures were also revised higher in the Commerce Department’s report from Tuesday.

More solid bank earnings

In individual stocks, banking shares continued to outperform with a series of consensus-beating earnings reports. On Tuesday, the benchmark KBW Bank Index increased more than 3%. Shares of Bank of America jumped 5.3% after second-quarter revenue and pre-tax profits came in ahead of market expectations. Positive for the firm’s share price were also comments from management, which said it expects net interest income to rise later in the year. Similarly, Morgan Stanley beat market expectations on revenue and profit, with shares ending Tuesday’s session up 0.9%. Goldman Sachs was up another 2.2% on Tuesday after strong gains on Monday as well, when it released quarterly figures.

Asian trading mixed

In the Asia-Pacific region, stock markets were mixed. In Australia, the S&P/ASX 200 shot up about 1%, supported by gains by gold-mining stocks. The Nikkei 225 was trading 0.2% lower, despite the Tankan survey showing increased business optimism among Japan’s largest manufacturing firms. In South Korea, the Kospi was down 0.5%. Hong Kong's Hang Seng Index gained 0.3% and the CSI 300 was trading 0.2% higher. The Taiwan Weighted Index plummeted after media reports cited former US president Donald Trump as saying Taiwan should pay for US defence services.

Rate cut expected in Canada as inflation slows

The Consumer Price Index in Canada rose at a slower pace than expected in June, strengthening the view that the Bank of Canada (BoC) will implement another interest rate cut at its policy announcement next week. The annual inflation rate dipped to 2.7% in June, slightly below the median forecast of economists and down from May's 2.9%. Market participants now widely expect the central bank to cut interest rates by 25 basis points on July 24 after the BoC became the first G7 central bank to cut its benchmark interest rate this cycle in June.

Germany’s ZEW falls for first time in a year

The ZEW Indicator of Economic Sentiment for Germany declined in July, marking the first decrease since July 2023. The indicator fell 5.7 points from the previous month to 41.8 points. This decline is attributed to factors such as a decrease in German exports, political uncertainty in France, and uncertainty surrounding the future monetary policy of the European Central Bank. Additionally, sentiment regarding the economic development of the eurozone also experienced a decrease in July. The Euro Stoxx 50 fell 0.7% and the DAX lost 0.4% on Tuesday.

Corporate and macroeconomic calendars

Corporate news in focus: Earnings figures from Johnson & Johnson, ASML.

Economic data in focus: UK Consumer Price Index, euro-area consumer prices, US building permits, US Fed Beige Book.

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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