Friday, 10 July 2015

Daily Market Review 10.07.2015

Which US Stocks Could Be Impacted By China? Canada is the U.S.’s largest trading partner and China sits in second place. With this in mind, combined with the recent decline in the Chinese stock markets, you must be wondering if any American companies are at risk in any way. The reality is, today, China is an important market for companies in the U.S. from iPhones to luxury handbags and more. Does this now mean that these U.S. companies should expect a negative impact to their profitability? Until now, analysts have made it clear that they do not expect the current instability in the market to cause a broader economic crisis. They are however recommending that investors reduce their risk when it comes to China. This means both refraining from buying Chinese stocks as well as investing in any U.S. company which relies heavily on China for the majority of their revenue. Based on this, the main companies on the S&P 500 index (SPX) which have the most sales from China include Skyworks Solutions Inc. (SWKS, -0.84%) at 67%, Yum Brands Inc. (YUM, +1.22%) at 52%, Qualcomm Inc. (QCOM, +0.16%) at 48%, Avago Technologies Ltd. (AVGO, -2.60%) at 48% and Micron Technology Inc. (MU, -2.30%) at 40%. Interestingly, it is the technology companies which are most exposed to the current volatility in China. Added to this, Yahoo Inc. (YHOO, +1.11%) currently still owns a stake in Alibaba Group Holding Ltd. (BABA, +1.74%) of 15 percent. Meanwhile, 16 percent of Apple Inc.’s (AAPL, -1.84%) revenue comes from China. Now there is something to think about. 

On Thursday, despite coming off session highs, U.S. stocks ended the trading day higher. This came as a result of a boost in investor confidence which was evident in the gains for riskier assets such as commodities and stocks as well as an increase in bond yields. This was a relief after the chaos on Wednesday where losses in the main indices were strongly impacted by the halt in the New York Stock Exchange for 3.5 hours as a result of a technical problem. At the close of trading, the Dow Jones Industrial Average (DJIA) rose 0.5%, or 87 points, to 17,602. Also on the upside was the S&P 500 index (SPX) which advanced 0.5%, or 11 points, to 2,057 while the tech heavy Nasdaq Composite index (COMP) also rose 0.7%, or 34 points, to 4,944. 

On Thursday, the U.S. dollar (USD) traded broadly higher. This increase came despite data which showed that last week, jobless claims in the U.S. had increased to its highest level since February. According to the U.S. Department of Labor, for the week ending on the 4th of July, the number of individuals filing for initial jobless benefits was at 297,000, up 15,000. This missed analysts’ expectations for a decline of 7,000 to 275,000 last week. Meanwhile on Wednesday, after the minutes of the Federal Reserve’s June policy meeting were released, the USD declined. This came after the Fed stated that before they will raise interest rates, they will need to see more signs of a strengthening economy in the U.S. The EUR/USD traded at 1.1036, down 0.37% while the GBP/USD was at 1.5393, up 0.21%. Meanwhile, against the currencies in Canada, Japan and Switzerland, the greenback traded mixed with USD/CAD down 0.08% at 1.2734, with USD/JPY up 0.57% at 121.39 and with USD/CHF up 0.40% to trade at 0.9491. Also, the U.S. dollar index was at 96.69, up 0.31%.

On Friday, crude oil prices gained slightly in early Asian trade. This came as investors maintained their focus on the volatility in China to establish demand cues from the world's top importer. Also, investors are awaiting the weekly report from Baker Hughes (NYSE:BHI) expected out today on the current rig count in the U.S. Last week, the company reported that the rigs in the country rose by 12 to 640. This marked the end of a 29 week streak of weekly draws. WTI crude oil for delivery in August traded at $52.84 a barrel, up 0.10%, on the NYMEX. Also, on Thursday, Brent crude oil for delivery in August traded at $58.66, up 2.84%, or $1.62, on the Intercontinental Exchange (ICE) in London. 

The Daily Market Review brought to you by Billionaire Forex UK in collaboration with STOCK. 

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