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Market Buzz: Worries over US stimulus future and Chinese growth

Market Buzz: Worries over US stimulus future and Chinese growth
Russian investors are expected to get little domestic drive on Monday. Internationally, developments around the US stimulus program and concerns over a credit squeeze in China will prevail during the week.

“I think, the Russian market will start a trading session on July 8 next to to its closing levels of Friday,” and it will be moving sideways during the rest of the day, according to Ekaterina Kondrashova of Investcafe.

Given that little macroeconomic stats are expected, Russian floors are likely to watch international markets, Kondrashova added.

After a robust start on Friday Russian stocks finished the day lower. The RTS lost 0.94 percent to 1,268.59, with the MICEX going down 0.48 percent to 1,342.72.

Asian markets slid in Monday trading on concerns of an economic slowdown in China and a cut in government stimulus in the US. Hong Kong's Hang Seng Index dropped 2.4 percent and the Shanghai Composite lost 1.9 percent on the mainland. Monetary authorities in China are now cutting lending, worrying it could race out of control. Such a cash squeeze could cut the country’s credit growth by $122 billion in 2013, according to the estimates by Bloomberg analysts.

“The biggest concern is whether this will lead to a de-leveraging cycle where lending and borrowing become more difficult and then the economy slows dramatically into the later part of the year,” Hans Goetti, Singapore-based chief investment officer for Asia at Finaport Investment Intelligence, told Bloomberg TV. “The tapering by the Fed has become much more of a reality after the jobs report.”

An opening of the corporate reporting season in the US will be one point of investor attention this week, as market players seek to get any signs of economic improvement since the Federal Reserve said it could ease up on its stimulus at the end of  2013. In the framework of the bond – buying programme, the US government pumps $85 billion into its economy.

Alcoa will be the first to show its second – quarter financials on Monday. Other companies to report later this week include Yum Brands, JPMorgan Chase, as well as Wells Fargo.

Among other economic events that could give investors a hint of the possible action by the US Fed are the minutes from the Federal Open Market Committee (FOMC) to be released on Wednesday, as well as data on consumer credit, the Treasury budget, Michigan sentiment and Producer Price Index.

On Friday, all three US stocks finished trading on an upbeat note, buoyed by better payroll figures. The Dow Jones Industrial Average and the S&P 500 both rose more than 1.5 percent during the week, while the Nasdaq was up more than 2 percent. The number of people with a job in the country increased by 195,000 in June, according to the Labor Department. The figure compares to the Bloomberg median forecast of a 165,000 gain.

In Europe, stocks finished lower on Friday, as weak factory order numbers in Germany disappointed.

Orders from the euro zone unexpectedly fell by 3.9 percent during May, in a sign that recovery in Europe’s largest economy may be disrupted. The British FTSE 100 lost 0.72 percent, German DAX went 2.36 percent lower and French CAC slid 1.5 percent.