By Geoffrey Smith
Investing.com -- Fears for the U.S. economic recovery send a chill through markets. The dollar hits a two-year low against the euro and other currencies after weak labor market data, signs of a delay to the next stimulus package and hawkish words on China from Donald Trump. China's stock market falls heavily. The euro hits a 22-month high as the eurozone economy returns to growth. Intel (NASDAQ:INTC) stock slumps after announcing another delay to a key project, and Disney is also struggling to deliver on its pipeline of money-spinning movies. Here's what you need to know in financial markets on Friday, July 24th.
1. Fears for U.S. rebound as labor market, stimulus talks stall
Concerns that the U.S. economic recovery may be faltering sent a chill through global markets, hitting risk assets and supporting havens.
The yield on the U.S. 10-Year Treasury note fell to 0.56%. It has only ever closed below that level once, back in April. Gold futures, however, failed to break through the $1,900 level for the second day in a row.
The move was triggered on Thursday by a combination of a rise in weekly initial jobless claims and a fresh delay to the announcement of Republican plans for the next package of stimulus measures. These will now only be published next week, according to Senate Majority Leader Mitch McConnell.
2. Chinese markets fall as Trump threatens trade deal
Another factor weighing on risk assets is the latest diplomatic spat between China and the U.S. Beijing ordered the U.S. to close its consulate in Chengdu in a tit-for-tat response to Washington’s closure of the Chinese consulate in Houston at the start of the week.
At his press briefing on Thursday, U.S. President Donald Trump appeared to prepare the ground for further trade measures against China, saying that the phased trade deal that the two countries signed at the start of the year “means less to me now than when I made it,” due to China’s role in the spread of the coronavirus.
Chinese stocks reacted badly to the threat, the Shanghai Shenzhen CSI 300 falling 4.4% to its lowest in three weeks. The dollar, meanwhile, rose to a three-week high of 7.0236 yuan before retracing slightly.
3. Euro hits 22-month high as eurozone returns to growth
The dollar lost ground against many other currencies, however, strengthening suspicions that it is in for an extended decline against developed-world currencies after giving up its interest rate premium and now also appearing to be on the brink of another economic relapse.
The dollar index which tracks the greenback against a basket of six developed currencies, took out its April low to hit its lowest level since September 2018. The euro, in particular, gained across the board, breaking through $1.16 for the first time in nearly two years.
The single currency was also underpinned by the release of stronger-than-expected purchasing manager indices across the continent. IHS Markit’s composite Eurozone PMI rose to 54.8 in July from 48.1 in June, a reading that suggests the economy stopped shrinking at the start of the third quarter.
In the U.K., meanwhile, the bounce in retail sales finally arrived: they rose 13.9% in June, although the Office for National Statistics warned that consumption is still running well below pre-Covid-19 levels.
4. Stocks set to open lower; Earnings bandwagon rolls on
U.S. stock markets are set to open lower and appear likely to stay under pressure until either the U.S.-China newsflow improves or Congress can make more substantial progress on the next stimulus package.
The rise in jobless claims last week has focused market attention on the risk to domestic consumption if the current support for the millions of newly-unemployed is allowed to expire at the end of the month.
By 6:35 AM ET (1035 GMT), the Dow futures contract was down 61 points or 0.2%, while the S&P 500 Futures contract was down 0.3% and the Nasdaq 100 futures contract was down 0.9%
Today’s earnings highlights include updates from Verizon (NYSE:VZ), NextEra Energy (NYSE:NEE), American Express (NYSE:AXP) and Schlumberger (NYSE:SLB). Honeywell (NYSE:HON) has already published, with earnings some 4% ahead of expectations
5. Intel, Disney disappoint with delays
Investors will be hoping that those companies can serve up better news than Intel (NASDAQ:INTC) did after the close on Thursday. Intel stock was down 11.8% in premarket trade after announcing another delay to production of its new generation of 7-nanometer chips.
The company said it may not be able to start making the chips until early 2023.
The shares of rival Advanced Micro Devices (NASDAQ:AMD) rose 5.8% in premarket trade.
Elsewhere in the corporate space, Walt Disney (NYSE:DIS) stock was down 1.8% after the entertainment giant said it would delay the release of its new Mulan movie, as well as the next instalments of the Star Wars and Avatar franchises.