Top 5 Things to Know in the Market on Thursday, July 16th

(C) Reuters.

By Geoffrey Smith

Investing.com — China becomes the first major economy to return to year-on-year growth post-Covid-19, but the country’s stock market tanks after heavy-handed state intervention. Twitter reels from a massively embarrassing and rather suspicious hack attack. Retail sales, jobless claims and house price data are due in the U.S., as are earnings from Johnson & Johnson, Morgan Stanley (NYSE:MS) and Netflix (NASDAQ:NFLX). And Christine Lagarde will try to convince the world that the ECB isn’t easing off in its fight against the pandemic. Here’s what you need to know in financial markets on Wednesday, July 16th.

1. China’s economy returns to growth; its stock market reverts to type

China became the first major global economy to return to growth in the wake of the Covid-19 pandemic, with gross domestic product rising 3.2% on the year in the second quarter, and 11.5% from the first three months of the year. Both numbers were above analysts’ expectations.

However, the Chinese stock market tanked and the yuan weakened after the People’s Daily newspaper attacked drinks company Kweichow Moutai for its overpriced liquor and flagged alleged links to corruption. The stock is a popular one with the retail investors who have piled into the market in recent weeks, and making it a target has the effect of cooling off the whole market.

Another factor that weighed on sentiment was the fact that some monthly data disappointed, with retail sales still running 1.8% below last year’s levels in June.

2. Retail sales, jobless claims due

Retail sales for June will also be the focus of Thursday’s data dump in the U.S., with the range of potential outcomes seemingly broader there than in the labor market, where the pattern of a grindingly slow decline in jobless claims is now firmly established.

Both sets of data are due for release at 8:30 AM ET (1230 GMT), along with the Philadelphia Fed’s monthly business survey. The NAHB housing market index is due at 10 AM, while New York Fed President John Williams’ speech at 9:10 AM may also draw attention.

Retail sales had rocketed by a record 17.7% in May, as the U.S. started to lift its lockdowns. Another 5.0% increase is expected for June. Initial jobless claims are expected to fall to 1.25 million from 1.315 last week, while continuing claims are expected to drop below 18 million.

3. Stocks set to open lower; banks, health and Netflix earnings eyed

U.S. stocks are set to open lower, retracing after a buoyant reaction on Tuesday to a better-than-expected rebound in industrial production and Goldman Sachs’s blowout second quarter. Rivals Morgan Stanley (NYSE:MS) and Bank of America will have their work cut out to match it when they report before the opening.

By 6:30 AM ET (1030 GMT), the Dow futures contract was down 190 points or 0.7%, while the S&P 500 Futures contract was down 0.8% and the Nasdaq 100 futures contract was down 1.5%

In addition to Morgan Stanley and Bank of America (NYSE:BAC), there are also updates due from Johnson & Johnson (NYSE:JNJ) and Abbott Laboratories (NYSE:ABT). Streaming giant Netflix reports after the close.

Other stocks likely to be in the spotlight include American Airlines (NASDAQ:AAL), which outlined plans late on Wednesday to furlough up to 25,000 workers when the company’s federal aid expires on Oct. 1, and Virgin Galactic (NYSE:SPCE), which named Disney’s parks head Michael Colglazier as its new CEO. It’s the second divisional boss Disney (NYSE:DIS) has lost in as many months.

4. ECB meets; EU slams data transfer practises

The European Central Bank’s governing council is meeting, but is not expected to announce any changes to monetary policy at 7:45 AM ET (1145 GMT) after June’s package of easing measures.

Of more interest will be President Christine Lagarde’s press conference starting at 8:30 AM, where the attention will be on any hints of limits to the central bank’s activism in supporting markets.

Europe’s top court meanwhile ruled earlier that the current framework for data transfers from the EU to the U.S. isn’t up to scratch (effectively dissing the effectiveness of U.S. data privacy rules). The ruling has potentially far-reaching effects for many U.S. and European companies, not least the social media giants.

5. Twitter hacked

One particular social media giant has some soul-searching to do. Twitter’s platform was hacked in a high-profile attack that compromised the accounts of, among many others, Elon Musk, Bill Gates and Joe Biden. The attack comes only a few months after CEO Jack Dorsey’s account was hacked.

The hack was ostensibly driven by scammers, who posted messages encouraging Bitcoin donations. Around $100,000 in Bitcoin was stolen, according to various reports (the price of Bitcoin fell over 2% in response to yet another illustration of its links to illicit activity).

However, it can’t be ruled out that the Bitcoin aspect of the hack was intended to divert attention from something else. After all, if you had access to Elon Musk’s account and you had any inkling of how far it could move Tesla (NASDAQ:TSLA) shares in the current environment, why would you satisfy yourself with $100,000 worth of cryptocurrency?

Twitter (NYSE:TWTR) stock was down 6.6% in premarket trade.

Top 5 Things to Know in the Market on Thursday, July 16th