MAIN EVENTS THIS WEEK
Monday: CN GDP, Industrial Production, Fixed Asset Investment, Retail Sales, EU Trade Balance, US Retail Sales, Empire Manufacturing, Bank of America, Netflix earnings, US President Trump meets Russian President Putin in Finland, UK/EU negotiations on Brexit in Brussels, UK House of Commons debate on Customs Bill, EU Foreign Affairs Council discusses Iran nuclear deal
Tuesday: AU RBA Policy Minutes, UK Claimant Count & Average Earnings, BoE Governor Carney, US Industrial Production, Capacity Utilisation, Fed Chair Powell semi-annual testimony (Senate), API Inventories, Goldman Sachs, Johnson & Johnson, UnitedHealth earnings
Wednesday: UK CPI/RPI/PPI, EU CPI (F), US Building Permits, Housing Starts, Fed Chair Powell semi-annual testimony (House), DoE Inventories, Beige Book, Alcoa, American Express, eBay, Morgan Stanley earnings
Thursday: AU Trade Balance, Employment Change, UK Retail Sales, US Philly Fed, Weekly Jobless Claims, Microsoft, SAP earnings
Friday: UK PSNB, OPEC Joint Ministerial Monitoring Committee meeting, G20 meeting of finance and central bank deputies, CA CPI, Retail Sales
Saturday: G20 meeting of finance minister & central bank governors
Now that the World Cup and Wimbledon have come to their conclusion markets can now fully focus back to the events for the trading week ahead. However, for any of our French friends you will be forgiven for a late start this morning… Philippe I’m talking about you!
Trump meets Putin…
Starting off with the trade war situation where the President’s exclusive interview with the Sun newspaper caused a stir last week but failed to fully materialise in the press conference from Blenheim House, where Mr Trump classified the reports as “fake news”. Slightly more disconcerting is that the UK Prime Minister stated on Sunday that the advice she received from the President was to sue the EU not negotiate when it comes to Brexit.
For markets the Trump tour continues and Monday could in fact be the most interesting of them all as he meets with Russian President Putin in Finland. From a practical point of view for strategies ahead this means you need to be vigilant for slightly earlier times on Twitter as we also have a G20 meeting at the end of the week, so no doubt Trump will continue to be vocal on issues from military spend to global trade relationships.
Powell’s semi-annual testimony…
On Tuesday Fed Chairman Jerome Powell will deliver his semi-annual testimony before the Senate Banking Committee (Tues) and the House Financial Services Committee (Weds). For those new to markets this is one of the keynote speeches in the Fed Chairs calendar and typically a platform used historically to deliver the latest insight into monetary policy and the economy outside of the traditional meetings.
Despite the apparent importance of the event I’m not convinced we will hear much new with assessments of the broader economy likely to leave the FOMC comfortable with their current course of action. Whether or not the market reacts will likely be derived from the commentary surrounding the on-going global trade spat and the potential at this point that some members may feel uncomfortable about the rising risks associated with an all-out escalation and its impact of mitigating the benefits of the recent tax reforms in the US.
Insight into BoE’s hiking intentions…
This week we get the latest wage and inflation data from the UK. As ever, these data points will be telling for the prospects of a August rate hike from the Bank of England and with Theresa May’s white paper surviving for the time being the upcoming economic data could be a potent force for GBP direction as the week progresses.
On the inflation front, analysts at Deutsche Bank expect inflation to be elevated over the next two prints with risks skewed to the upside as the bulk of energy price hikes come through in June.
US earnings season picks up pace…
So far only 5% of the S&P 500 have reported but this week sees the likes of Goldman Sachs, Johnson & Johnson, UnitedHealth Group, American Express, eBay and Microsoft to name a few. As what was largely anticipated, 89% of S&P 500 companies have reported a positive EPS surprise and 85% have reported a positive sales surprise, according to data provider FactSet.
For Microsoft, the Street is looking for an adjusted EPS of $0.85c with revenues to be up 9.4% Y/Y at $25.77bln. As a reference, MSFT have beaten analyst consensus on the EPS reading by an average of $0.14c over the past four quarters and options are pricing in an implied move of 4.51% off earnings. Meanwhile, FANG name Netflix reports after the close today and will be watched with interest following an incredible run in their share price through 2018 (+107% YTD). As per usual the numbers surrounding subscriber additions, both domestic and international, will be key and with an average 1-day price change of over 9% on earnings day, you can expect a sizeable reaction whatever the outcome.
Oil consolidates around $70…
WTI crude has pulled back towards an interesting level of support around $69.50 in front month futures. This in combination with two distinct trends lines should prove to be a strong barrier to any further downside in the wake of supply developments.
In recent news, it was reported at the weekend that output at Libya’s biggest field (Sharara) is set to drop by half after authorities evacuated staff and shut wells for safety following the armed abduction of several workers, according to Bloomberg.
Meanwhile, it will be interesting to hear the compliance levels from the recent OPEC/non-OPEC accord with the Joint Ministerial Monitoring Committee (JMMC) meeting on Friday, chaired by Saudi oil minister Al-Falih.