The news shaping the markets today

Russia shelled the eastern region of Ukraine, killing at least three Ukrainian civilians. Despite the ongoing war, WTI crude oil futures traded lower this morning.

Israel’s annual inflation rate accelerated to 5.2% in July, from 4.4% a month ago. This being the highest inflation reading since October 2008 exerted pressure on the ILS/USD forex pair.

Uruguay’s central bank increased its benchmark policy rate by 50 bps to 10.25% at its latest meeting, announcing a rate hike for the ninth straight meeting. The news sent the UYU/USD pair higher in forex trading this morning.

Sri Lanka’s manufacturing PMI fell to a three-month low of 41.4 in July, from 44.1 a month ago, exerting pressure on the LKR/USD forex pair.

The NAHB housing market index fell for the eighth consecutive month to 49 in August, sending the US dollar index lower this morning.

What’s happening: Shares of Li Auto rose on Monday, after the company reported results for its second quarter.

What happened: The Beijing, China-based electric vehicle manufacturer reported a loss for the latest quarter.

However, the company reported strong year-over-year growth in Li ONE’s deliveries.

How were the results: The PHEV (plug-in hybrid electric vehicle) maker posted strong growth in revenues in the second quarter.

• Revenues jumped 73% year-over-year to 8.73 billion yuan ($1.30 billion), surpassing the consensus estimate of $1.12 billion.
• Non-GAAP net loss came in at 2 cents per share, better than market expectations of 6 cents per share.

Why it matters: Several automakers faced production issues due to covid-19 restrictions in China. However, Li Auto made significant progress in overcoming such issues to keep pace with EV giants like Tesla and NIO.

Li Auto launched its new L9 model SUV in June and reported that it received 30,000 orders during the first 72 hours. Deliveries are likely to commence later this month, with Li Auto expecting 10,000 deliveries in September.

The company’s deliveries of Li ONEs climbed 63.2% year-over-year to 28,687 vehicles, while deliveries declined by 9.6% from the previous quarter.

Vehicle margin widened 250 basis points from a year ago to 21.2%. The company’s gross profit rose 97.1% year-over-year to 1.88 billion yuan, while margins widened 260 basis points to 21.5%.

The company’s operating loss increased to 978.5 million yuan, from 535.9 million yuan in the previous year.

Management projected vehicle deliveries of 27,000 to 29,000 for the third quarter, representing a rise of 7.5% to 15.5% year-on-year. The company also guided to third-quarter revenues of 8.96 billion yuan to 9.56 billion yuan, representing 15.3%-22.9% year-on-year growth.

How shares responded: Li Auto ADR rose 0.2% to close at $32.56 on Monday. The stock has lost around 17% over the past month.

What to watch: Investors will keep an eye on the spread of covid-19 infections in China, as the emergence of any more subvariant could impact the production level of the company. Markets will also keep an eye on moves by Li Auto’s rivals, including Tesla, NIO, Xpeng and BYD.

The markets today

The British pound will be in focus today ahead of jobs data from the country

Context: The sterling recorded losses versus a strong US dollar on Monday, as traders moved to the safe-haven greenback following the release of weak data from China.

Details: China released weak data on industrial production and retail sales, which fuelled concerns over a global economic slowdown and triggered demand for the safe-haven US dollar.

The US dollar index, which measures the greenback’s performance versus a basket of major rivals, gained around 0.9% to 106.55 on Monday.

Traders await several economic reports from the UK this week to get some insight into the state of the country’s labour market as well as inflationary pressures.

The UK will be releasing figures on employment, inflation and retail sales this week, which are expected to guide the Bank of England in its rate-hike decision, to be announced after its September meeting. Market experts on average expect the BoE to raise rates by around half a point, taking the total tightening to approximately 125 bps by yearend. UK’s interest rate currently stands at 1.75%.

The GBP/USD forex pair fell around 0.7% to close at 1.2053 on Monday. However, the sterling gained against the euro, trading higher by around 0.3% to 84.28 pence. London’s FTSE 100 rose 0.11% to settle at 7,509.15 on Monday.

What to watch: Traders await the release of economic reports on the unemployment rate, employment change and labour productivity from the UK today. The unemployment rate in the UK is expected to remain unchanged at 3.8% in June, while the number of people in work is projected to increase by 256,000. Analysts expect labour productivity to rise 0.9% on quarter in the second quarter, after a 0.6% decline in the first three months of 2022.

Other Markets: US indices closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.45%, 0.40% and 0.75%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

India’s wholesale price inflation, Eurozone’s balance of trade and ZEW indicator of economic sentiment, Germany’s ZEW indicator of economic sentiment and current conditions subindex, Turkey’s total motor vehicles production, Canada’s housing starts, inflation rate and foreign investment in Canadian securities, US building permits, housing starts, Redbook index, industrial production, manufacturing production, capacity utilization and API crude oil stocks, as well as China’s foreign direct investment.