“The financial markets generally are unpredictable. So that one has to have different scenarios… The idea that you can actually predict what’s going to happen contradicts my way of looking at the market.” — George Soros

1. Federal Reserve Raises Big Bank Capital — the US Central Bank said the largest 8 US banks must hold extra equity capital — 1%-4.5% of assets — encouraging them to reduce their size or risk. The new requirements may shrink profit and lending. JP Morgan (JPM), due to its size and complexity, faces a 4.5% bump. Others effected are Goldman (GS), Citi (C), Morgan Stanley (MS), AND Bank of America (BAC).
2. China and Federal Reserve Weight on Gold — gold fell to $1,106 an ounce on Comex, hitting its lowest level since Mar 2010, amid indications of lower Chinese demand and growing expectations the Fed will raise interest rates soon.
3. World’s Largest Hedge Fund Bridgewater Turned Bearish on China — Ray Dalio, billionaire and founder of Bridgewater Associates LP, the world’s biggest hedge fund has turned Bearish on the world’s fastest-growing economy. He warns, “our views on China have changed… there are no safe places to invest.” based on the latest newsletter. Thee move adds to a growing chorus of high-profile investors who are challenging the long-held view that China’s rise will provide a ballast to a whole host of investments, from commodities to bonds to shares in multinational firms, as they realize, “it appears that the repercussions of the stock market’s declines will probably be greater.”
4. Latest AAII Sentiments — courtesy of BIG, sentiment survey from the American Association of Individual Investors (AAII) showed modest increases in both bullish and bearish sentiment. In the case of bullish sentiment, an increase to 30.81% up to 32.5%, which marks the 17th straight week where sentiment has been below its average level dating back to 2009. During that period, the only other longer streak of below average readings in bullish sentiment was three years ago in the 20-week period stretching from April through August of 2012.

5. China Slowdown Continues, PMI Drops Sharply — business activity in China’s factory sector contracted at the fastest pace in 15 months in July, suggesting that the world’s second-largest economy is struggling to stabilize and halt a broad slowdown. The flash Caixin/Markit China PMI dropped to 48.2, the lowest reading since April last year and the fifth straight month under 50 – the level that separates growth from contraction.

The week ahead — Economic data from Econoday.com: