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The first view on Big Tech earnings wasn’t inspiring. Tesla’s earnings missed estimates for the 4th consecutive quarter as revenue from car sales declined 7%. Shares slashed almost 8% in the afterhours trading. Over at Google, the parent Alphabet reported the smallest earnings beat since early 2023 and the share price fell 2% in the afterhours trading.

As such, two of the Magnificent 7 stocks failed to create euphoria when they reported their Q2 results yesterday. The S&P500 and Nasdaq both closed yesterday’s session with small losses, and the futures are both in the negative this morning.

In Europe, the news weren’t much better. LVMH saw its ADRs decline almost 5% after announcing that revenue in China-region fell 14% in Q2 – in line with a broad-based weakness in other luxury houses across Europe as well.

Copper futures are down by 20% since the May peak, while US crude cleared the 200-DMA without much problem despite a 3.9-mio-barrel fall in US oil inventories last week

In the FX, the US dollar index was slightly stronger yesterday despite weak data, the euro and sterling retreat while the yen strengthens on bets of Bank of Japan (BoJ) hike next week.

Later today, the Bank of Canada (BoC) is expected to cut rates by 25bp.

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Week started on a bullish note in Europe and the US as Jow Biden’s decision to leave the presidential race didn’t impact the market mood. Major US and European indices rebounded, mega cap led gains and the US dollar weakened.

Tesla and Google are due to report earnings today after the bell, and their results – or the reaction to their results – could shift the wind in either direction.

In energy, US crude slipped below the $80pb psychological and Fibonacci support and tipped a toe below the 200-DMA despite a surprise People’s Bank of China (PBoC) rate cut, the reflation-positive market environment and supply concerns on rising geopolitical tensions in the Mid-East and Canadian wildfires.

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Joe Biden threw in the towel and announced that he quits the presidential race this weekend. The early polls show that Harris is a favourite to become the new Democrat nominee, but that Donald Trump is still expected to win the November’s presidential election. The Trump trade could lose some steam but will probably not get reversed if Harris doesn't make a material difference in the polls quickly.

The latter expectation was reflected with a brief post-announcement selloff and a rebound in Bitcoin. The US dollar is slightly softer across the board. Stock futures in Europe and the US are in the green while the Treasuries show muted reaction with small gains at the beginning of a new week.

But the week started looking unappetizing in Asia. Equities in Australia and China fell despite a surprise rate cut announcement from the People’s Bank of China (PBoC), while TSM kicked off the week with a 3% fall after last week erased more than 3.5% from the technology-heavy Nasdaq stocks in the US. The S&P500 fell nearly 2% over the week, while the Russell 2000 printed a 1.50% advance despite erasing more of the earlier gains on Friday.

Markets will focus on US GDP update, core PCE index and earnings from Tesla and Google this week.

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TSM announced better-than-expected quarterly results and lifted its growth projections for this year’s revenue. Good news helped limiting the previous day selloff in chip stocks yesterday but couldn’t prevent the S&P500 and Nasdaq 100 from closing Thursday’s session with losses. Week brings a lot of questions regarding the remaining potential of the AI rally…

In politics, Biden is under an unbearable pressure to leave the presidential race because he is too old. Many Democratic heavy weights are now turning their back against the President. Even Barrack Obama said he should consider stepping down. And there are rumours that he could throw in the towel as early as this weekend. If that happens, we could see the Trump trade gain further momentum.

Some ask how long this Trump trade will last. The answer is a few weeks, maybe a few months, time to give the non-tech pockets of the market to catch their breath and the tech to correct following a breathtaking year-and-a-half rally. But in fine, factors like the Federal Reserve (Fed) and other central banks’ policy decisions, the international trade tensions, the global growth prospects, China, climate and idiosyncratic factors like AI should say the last word on the overall direction of the global stock markets.

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While everyone is speculating on how the ongoing international trade war could worsen if Donald Trump returns to the White House, it was Joe Biden who delivered a blow to the market yesterday as his administration told allies that it’s considering severe restrictions if companies like the Japanese Tokyo Electron and Dutch ASML keep providing China the tools they need to access advanced chip technology. Chipmakers tanked and pulled major indices lower. Let’s see if earnings from Netflix and TSM could put a smile back on investors’ face and help TSM – which lost 8% yesterday – recover a part of these losses.

Yesterday’s big tech selloff hit sentiment in small caps too. The Russell 2000 gave back 1% as the US 2-year yield rebounded slightly on cautious comments from the Federal Reserve (Fed) Christopher Waller’s comments that the Fed is getting ‘closer’ to cutting rates but he needs more evidence that inflation is on a solid downside trajectory to back a concrete move.

The selloff in the US dollar index accelerated as the index pulled out a crucial Fibonacci support – the major 38.2% retracement on year-to-date rally. The move was helped by suddenly stronger Japanese yen (suspected to have benefited from a new FX intervention) and stronger Cable following yesterday’s stronger-than-expected inflation data from the UK. The EURUSD consolidates.

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The S&P500 hit a fresh record this year for the 38th time on Tuesday, banks rallied on earnings which showed that the big banks’ trading revenue jumped nearly 20% in Q2 and investment banking revenues rose significantly on increased dealmaking. The technology-heavy Nasdaq 100 lagged, with smaller gains. The Russell 2000 rallied another 3.5%, on the other hand, hinting at a developing sector rotation from Big Tech to others. Gold gained, oil fell, and the US dollar is under pressure, as the EURUSD drills above the 1.09 mark and Cable tests the 1.30 offers after a set of stronger-than-expected inflation data eased the Bank of England (BoE) rate cut bets for August.

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The market uncertainties loom as different trades – Trump trade, reflation trade, China trade and AI trade – have diverging impact across regions and sectors.

On the data front, investors will focus on Canadian inflation print and the US retail sales, and UK inflation and jobs data later this week. Retail sales in the US are expected to have fallen 0.2% in June. Such weakness would back the Fed’s easing inflation story and further reinforce the expectation of a September Fed cut. We could then see the US dollar index make a decisive move below a major Fibonacci support and help major peers clear important resistances.

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Donald Trump got this close to being assassinated this weekend while he was giving a speech in an election rally. The tragic event boosted the chances that Trump will win the presidential election in November. Bitcoin rallied, gold remains surprisingly unreactive as the US dollar gained and futures point to gains at the open as investors will increasingly focus on earnings. Besides big banks, Netflix and TSM are due to release earnings this week.

In the FX, the euro is set to extend gains against the USD ahead of Thursday’s European Central Bank (ECB) meeting while Cable could see resistance near the 1.30 mark ahead of Wednesday’s CPI update.

In energy, US crude is under pressure following sluggish Chinese growth data as the Chinese Communist Party starts a once-in-five-years meeting to address major issues in the country.

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The softer-than-expected US CPI data sent the US yields and the dollar tumbling, and most majors rallying against the greenback. The USDJPY particularly attracted attention as traders tried to understand whether the move was natural, or it was somehow exacerbated by a Bank of Japan (BoJ) intervention.

In equities, the S&P500 and Nasdaq fell sharply yesterday after the US CPI data. The sharp rise in Fed rate cut bets and falling yields looked like they didn’t give support to the major US indices, but they did. The S&P500’s equal weight index jumped 1.20%. The flight from Big Technology to other sectors, the reflation trade, was big like a mountain at yesterday’s trading session. But it also came as a proof that, no matter how hard the other sectors rally, if the bleeding in Big Tech stocks is not contained, the major indices will suffer.

Today, attention shifts to earnings. The Us big banks will open the dance today.

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