Equity Strategy: US earnings Q4 preview: Two major stocks to watch

Week Ahead
  • S&P 500 EPS seen just higher in Q4
  • Valuations are stretched after 2019’s multiple expansion
  • Tesla & Apple are top stocks to watch this earnings season

It’s easy to miss it, but US earnings season gets underway next week as the big banks begin reporting on Jan 14th. Weak corporate earnings growth could dent optimism around US stocks, but with the fourth quarter of 2019 out of the way, the market’s real focus is going to be whether we get the 10% earnings growth forecast in 2020.  

Consensus estimates indicate a 1-2% decline in Q4 earnings, but the tendency to beat expectations suggests we will see earnings growth, albeit small.  

Last year we saw multiple expansion massively outweigh earnings growth as the driver of the 28% rise in the S&P 500 last year. This poses problems as it means valuations are already rather stretched and reliant on strong EPS growth in 2020. The S&P 500 forward PE has jumped to 19 from a start of about 14 at the beginning of 2019, having averaged 16-17 over the last five years. Remember though that the starting point of the year was exceptionally weak given the Christmas 2018 drubbing. From the 2018 high through the recent all-time highs, the S&P 500 has only risen by a more modest 10%. 

Two top stocks to watch this earnings season 

Tesla – The stock has enjoyed a remarkable run up to record highs at $472 as the company turned a profit in Q3, reported a surge in deliveries and sent investors into a frenzy with its Shanghai plant and promise of electric growth in China. That and a huge amount of short covering.

Shorts have been crushed. A surprise profit in the third quarter has been the catalyst while we have seen remarkable progress in China and with the Model Y. Last week Tesla said it delivered 367,500 vehicles last year – double that recorded in 2018. It was above the forecast of at least 360,000 offered in Oct, but still at the low end of the expectations for 360,000-400,000 forecast at the start of the year. Investors seem to be shrugging off the fact that growth in 2019 was below the run rate seen in H2 2018 as it ramped production to beat a cut-off for US tax credits. 

In Q3 Tesla made $143m against a loss of $1.1bn in the first half. And revenues came in at $6.3bn, down from $6.8bn a year ago and short of the $6.5bn expected. Deliveries had reached a record in the quarter but fell a little short of expectations.  

We suggested in October when the Q3 numbers were released that this could be the turning point for this battered stock. After spending big to get the Model 3 out the door it’s managed to cut costs by 16% and has cash on hand of $5.3bn. The company expects the higher margin Model Y will vastly outsell all other models ‘combined’. 

That cash pile will be needed though as Tesla also plans to create a new ‘gigafactory’ in Europe and invest in rolling out its new Semi heavy duty electric truck. 

The usual concerns remain – cost control, production capacity and the fact that despite being very firmly in the growth category vehicle deliveries remain a problem. The breakneck speed of production in H2 18 seems to be a high watermark. Moreover, like a number of companies that have attracted great attention but have yet to consistently make a profit, Tesla has not had to contend with a recession yet. 

The Analyst Recommendation tool on the Markets.com platform indicates the Street remains split – analysts still don’t agree on this one.

Apple – The fiscal first quarter is always Apple’s strongest as it chalks up the holiday season and new iPhone models. We’ve had decent indications from the Services side of the business indicating that its pivot to being more of a Services business is in full swing. App store customers spent a record $1.42bn between Christmas and New Year, 16% up on last year, the company has said. Management also revealed that Apple News is drawing over 100m monthly active users across the US, UK, Canada and Australia. This is all to the good – Services margins are about double that for the rest of the business and will mean re-rating of the stock going forward. 

The stock has run up quite a head of steam to hit $300. We’ve seen a potential topping pattern on the chart as it fails to make new highs and the 14-day RSI indicating overbought conditions. MACD could also be turning. Moreover, on a trailling 12-month (TTM) basis Apple’s PE has soared to 25 from around 11 last year. Upside potential may therefore be limited. A lot depends still on iPhone sales. 

Our analyst recommendations tool highlights that while the broad consensus on the Street is positive, the average price target indicates the stock may have topped out, temporarily at least.

One thinks that the Street is just playing catch up and will rerate, although it’s fair to say that Apple stock is relatively expensive vs its historic average. 

Apple posted record Q4 revenues despite slower iPhone sales and guided for a very strong holiday quarter. Earnings per share beat handsomely at $3.03 vs $2.84 expected and up 4% year on year. Revenues jumped 2% to $64bn.  

iPhone sales matter a lot less… 

The improvement on both top and bottom line in the fiscal fourth quarter came despite a 9% drop in iPhone sales. Whilst that’s not as bad as the 15% type level seen recently, it shows how much of the lifting is now being done by other parts of the business. It suggests Apple is reaching an inflection point where it’s no longer dependent on the iPhone for EPS growth. This is across the board a positive. Indeed for 2019 as a whole, iPhone sales fell 14% but the stock was up 89%. 

…because Services and Wearables are roaring ahead 

Wearables, Home and Accessories knocked it out the park, with sales up 54% to $6.52bn. This was by far the fastest growing segment and will account for an increasing percentage of sales, currently c10%. 

Services growth remains good at 18%. Stripping out certain one-off items that knocked the Q3 number, this represents consistent sequential growth from the last quarter. Whilst still very positive, it’s a comedown from the +20% levels seen in preceding quarters. But with a clutch of new services rolling out, not least Apple TV+, a renewal of past growth rates is on the cards. Higher margin, recurring Services revenues are a key reason why multiple expansion may be maintained. 

American consumers are in good shape 

The US consumer remains strong. Almost all the growth came from the Americas, which is dominated by US sales. American consumers still look in good shape. Sales in Europe, Japan and Greater China fell. 

Holiday quarter could be record breaking 

Guidance for the fiscal first quarter is bullish, and Apple could mark a record for quarterly revenues. Apple is guiding revenue of between $85.5 billion and $89.5 billion. Early indicators suggest the iPhone11 is performing well with consumers. Favourable comparisons in China from last year are assured, given the previous year’s downswing in iPhone sales in the region.  

Week Ahead: UK General Election plus FOMC, ECB, Aramco IPO

Week Ahead

General Election

British voters head to the polling booths on Thursday with the result critical to the future of Brexit, the economy and by extension, UK equities and sterling. Polls have consistently shown the Conservatives are heading to a comfortable majority, but a last-ditch surge by Labour is not out of the realms of possibility. Follow our election coverage daily on XRay.

Final FOMC meet of the year

The last FOMC meeting of the year is not expected to produce any change in the fed funds rate, but it will be another chance to see how close the Fed is to further cuts having signalled a pause to its easing cycle when it cut rates for the third time in succession in October. Lately it’s made it pretty clear that it would require a significant and sustained rise in inflation to warrant a hike, whilst there have even been reports that the Fed is thinking about changing its 2% inflation target to allow inflation to run even higher.

Saudi Aramco to start trading

The bookbuilding is complete and the price has been set – trading on Aramco shares on the Tadawul is expected to start this week. After the OPEC meeting last week and following concerns about valuations, this will be the largest and most hotly anticipated IPO in history. Our Aramco Grey Market is still open for new orders.

First ECB meeting for Lagarde

The first outing for Christine Lagarde as the chief of the European Central Bank (ECB) will be a closely-watched affair. Whilst markets do not expect the Governing Council to back any changes to rates or QE, the commentary from Ms Lagarde in the press conference will be picked over in fine detail for clues about her leanings and what we can expect from the ECB over the coming years.

Corporate Diary

Dec 12th – TUI full year results
Dec 12th – Dixons Carphone interim results
Dec 12th – Adobe Q4 2019
Dec 13th – Balfour Beatty trading update

Key Economic Events

(All times GMT)
Dec 9th – Tentative – China trade balance
Dec 10th – 00:30 GMT – Australia NAB business confidence
Dec 10th – 01;30 GMT – China CPI inflation
Dec 10th – 09:30 GMT – UK GDP, manufacturing production
Dec 10th – 10:00 GMT – German ZEW economic sentiment
Dec 10th – 23:30 GMT – Australia Westpac consumer sentiment
Dec 11th – 13:30 GMT – US CPI inflation
Dec 11th – 19:00 GMT – FOMC statement, fed funds rate
Dec 11th – 19:30 GMT – FOMC press conference
Dec 12th – 08:30 GMT – Swiss National Bank policy rate
Dec 12th – 12:45 GMT – ECB interest rate, policy statement
Dec 12th – 13:30 GMT – ECB press conference
Dec 12th – All day – UK General Election
Dec 13th – 13:30 GMT – US retail sales
Dec 14th – Tentative – US Treasury Currency Report (currency manipulators report)

Week Ahead: OPEC set to extend cuts

Week Ahead

OPEC to extend cuts

OPEC members convene in Vienna this week on Dec 5th and 6th. Markets are expecting OPEC and ally Russia to extend their oil production curbs but could be taken off guard should the cartel opt for deeper cuts. Currently the OPEC+ coalition have an agreement to reduce production by 1.2m barrels a day. Most participants think that OPEC+ will agree to extend cuts through to June, the next Vienna meeting, or even by a full year. The problem for OPEC is that while prices have recovered from the lows of Christmas 2018, there is not yet enough material uplift for all members to consider that the cuts have really worked enough to their advantage, with fiscal break-evens sitting around $80-$90 a barrel for most members.

Will the RBA cut rates?

Markets have strongly priced in odds of no change to interest rates from the Reserve Bank of Australia on Tuesday; but will the accompanying statement hold any surprises? Minutes from the November meeting showed policymakers agonised over the poor run of data and seriously considered cutting rates. It’s widely anticipated that the RBA will cut again, but the question is one of timing.

PMIs turning?

There are just a few signs that PMI surveys have hit the bottom. Can Chinese manufacturing continue to defy the pressures from the trade war with the US after October’s near three-year high? We may find out with the release of the Caixin manufacturing PMI on Monday. A month ago, the survey hit its highest in three years as factory activity expanded in defiance of the trade war.

This will be followed later the same day with the ISM report for the US manufacturing sector. Elsewhere, the UK services PMI on Wednesday will be closely watched for signs about the state of the UK economy as the election and Brexit approach.

Nonfarm payrolls

The monthly US labour market is always closely monitored, but with the Fed apparently on hold, it’s unlikely to deliver as much volatility as it has in days gone by. Whilst running at a slower rate than 2018, US labour market strength remains intact. Last month’s report showed nonfarm payrolls up 128k in October, well ahead of the 85k expected, whilst there were upward revisions to the prior two months. The August print was revised up 51k to 219k and the September number was hiked by 44k to 180k. The 3-month average at 176k against the 223k average in 2018. The revisions are really the bright spot as it indicates August and September prints were nowhere near as weak as we thought.

Bank of Canada

On Wednesday the Bank of Canada meets but is not expected to change course. Indeed the central bank is now expected to hold rates through to the end of 2020, according to a Reuters poll of economists. Markets have been eyeing a cut but governor Stephen Poloz and deputy Carolyn Wilkins have said that monetary conditions are ‘about right’ for now.

Corporate Diary

3 Dec – Salesforce Q3
4 Dec – Campbell Soup Co Q1 2020
4 Dec – Synopsys FY 2019
5 Dec – Dollar General Q3
5 Dec – Kroger Q3

Key Economic Events

(All times GMT)
02 Dec – 00.30 GMT – Australia building approvals
02 Dec – 01.45 GMT – China Caixin manufacturing index
02 Dec – 09:30 GMT – UK manufacturing PMI
02 Dec – 15:00 GMT – US ISM manufacturing PMI
03 Dec – 03:30 GMT – RBA cash rate, rate statement
04 Dec – 00:30 GMT – Australia GDP
04 Dec – 09:30 GMT – UK services PMI
04 Dec – 13:15 GMT – US ADP nonfarm employment change
04 Dec – 15:00 GMT – BoC rate statement, overnight rate
04 Dec – 15:00 GMT – US ISM non-manufacturing PMI
04 Dec – 15:30 GMT – US crude oil inventories
05 Dec – All Day – OPEC meetings
06 Dec – All Day – OPEC meetings
06 Dec – 13:30 GMT – US nonfarm payrolls, average earnings, unemployment rate

Week Ahead: Top US data in focus, Hong Kong row to weigh on trade talks

Week Ahead

US data to influence Fed outlook?

Top-tier US data this week could help shape expectations for the final meeting of the Federal Open Market Committee this year. Markets don’t expect any changes, but now that the Fed has declared that further adjustments will hinge upon the latest data prints, the upcoming CB consumer confidence report on Tuesday and Wednesday’s second Q3 GDP reading, durable goods orders, and personal incoming and spending figures could influence the outlook for policy over the coming months.

Trade talks to falter on Hong Kong row?

A spat over new US legislation supporting Hong Kong independence and banning export of some crowd control munitions to Hong Kong authorities has become a major new hurdle in the race for a trade deal. China is sure to interpret the new bills as interfering in its affairs and it is therefore hard to see Beijing being willing to agree to US demands in order to prevent the scheduled tariff increases in December. Stocks took a beating last week and there could be more pain to come.

Germany and Eurozone inflation

Preliminary readings of German and Eurozone inflation are due on Thursday and Friday respectively. Price growth remains sluggish despite everything the European Central Bank has thrown at it. Even an uptick is unlikely to do much for sentiment on its own, although there could be some upside for EUR pairs – it won’t make an unwinding of stimulus happen any faster, but at least it’ll show things aren’t getting any worse.

Best Buy earnings

Best Buy reports earnings for the third quarter of its fiscal 2020 year before the opening bell on the 26th. Analysts expect EPS of $1.04, which represents an 11.8% year-on-year increase. Revenue is projected 1.5% higher year-on-year at $9.73 billion. The stock recently came close to reclaiming the 2019 high of 78.45 recorded in late July, but despite retreating from that level remains over 40% higher year-to-date.

Corporate diary

25 Nov – Hewlett Packard Enterprise – Q4
26 Nov – Dell – Q3 2020
26 Nov – Dollar Tree – Q3
26 Nov – Best Buy – Q3 2020
26 Nov – Autodesk – Q3 2020
27 Nov – Xiaomi – Q3
27 Nov – British American Tobacco – Trading Update

Key economic events

(All times GMT)
25 Nov – 09.00 GMT – German Ifo Business Climate
26 Nov – 07.00 GMT – Germany GfK Consumer Confidence
26 Nov – 15.00 GMT – US Conference Board Consumer Confidence
27 Nov – 13.30 GMT – US GDP (2nd Estimate), Durable Goods Orders, Personal Income/Spending
28 Nov – 13.00 GMT – German Preliminary Inflation
29 Nov – 10.00 GMT – Eurozone Flash Inflation
29 Nov – 13.30 GMT – Canada GDP
30 Nov – 01.00 GMT – China NBS Manufacturing PMI

Week Ahead

Week Ahead

Trade tick tock 

The clock is ticking on getting a ‘phase one’ trade deal agreed in time for Christmas. This weekend coming was supposed to see the US and Chinese leaders meet in Chile and sign an agreement. Any meeting between the two has been pushed back to December, but there has been progress. Stay sharp for daily trade headlines. 

Powell testimony 

All eyes on the Fed again as chair Jerome Powell will discuss the economic outlook before the Joint Economic Committee of Congress on Wednesday. It comes after the Fed’s third rate cut this year and a signal that it is pausing the easing cycle. Also watch for the US CPI inflation readings the same day. 

Walmart earnings 

Shares in Walmart have been on a tear this year and there are more signs it’s actually pulling ahead of Amazon. A recent survey from First Insight showed a majority (55%) of US consumers said they prefer to shop at Walmart versus Amazon, up from about 47% a year earlier. The prior quarter earnings were very strong, beating on both top and bottom line. US sales rose for the 20th consecutive quarter. Q3 numbers are due at 11:00 GMT on Thursday. 

UK data 

A batch of UK data is crossing this week, providing traders with a clearer picture of the state of the economy as we enter the year-end. GDP and manufacturing numbers (Monday) are followed by unemployment and earnings figures (Tuesday), CPI inflation data (Wednesday), and retail sales (Thursday).  

RBNZ 
 

The Reserve Bank of New Zealand is expected to cut interest rates when it convenes on Wednesday. Analysts at ANZ say the central bank will cut the OCR to 0.75% from 1% and leave room for further cuts in the future. Westpac says the RBNZ will not cut rates, but the recent rise in unemployment from 3.9% to 4.2% may warrant additional stimulus. 

Corporate diary 

11 Nov William Hill – trading update 

12 Nov Aggreko – trading update 

12 Nov Deutsche Post-DHL – Q3 results 

12 Nov – Enel – Q3 results 

12 Nov – Infineon Technologies – FY results 

12 Nov – Linde plc – Q3 results 

12 Nov – Vodafone – H1 results 

13 Nov – ABN Amro – Q3 results 

13 Nov – British Land – H1 results 

13 Nov – SSE – H1 results 

13 Nov – TalkTalk – H1 results 

14-Nov – Walmart – Q3 earnings 

14 Nov – Bouygues – Q3 results 

14 Nov – Burberry – H1 results 

14 Nov – Merck KGaA – Q3 results 

14 Nov – National Grid – H1 results 

14 Nov – Premier Oil – trading update 

15 Nov – Vivendi – Q3 results 

Week Ahead: Uber, Disney earnings and Bank of England

Week Ahead

Welcome to your guide to the week ahead in the markets.

Uber earnings

Ride-hailing app Uber reports its third quarter earnings on Monday after a rocky start to life on the stock market. Peer and rival Lyft recently reported better-than-expected numbers, but there are concerns Uber is not keeping pace. Revenues rose just 14%, the slowest ever, while losses climbed from $292 million to $656 million. Monthly users rose 30% to 99 million, with trips up 35%. Shares have rebounded in October from the post-IPO lows but is there any room left on the upside?

Bank of England, RBA meetings

Following the Fed’s rate cut last week, central bank focus switches to the UK and Australia. First up on Tuesday is the RBA, which cut rates again to a record low of 0.75% last month. Whilst markets don’t see another cut this time, the bias remains to ease. The RBA said it can see a ‘turning point’ in some economic data but added ‘an extended period of low interest rates will be required’. Governor Philp Lowe last week reiterated the RBA can cut again but pushed back on the prospect of negative rates.

On Thursday the Bank of England is similarly expected to leave rates on hold. Whilst they would like to be free to make their own call unhindered, the continued Brexit-related uncertainty is likely to mean rates stay on pause. Lately the outlook seems to be shifting towards, unofficially at least, more of an easing bias.

Disney earnings

Much of the hype around Walt Disney is currently focussed on its upcoming Disney+ streaming service, which is set to launch this month. Guidance for the fiscal 2020 year will be of particular interest as it will show what impact the new revenue stream is expected to have on top and bottom lines.

Analysts are expecting DIS to post a sharp decline in earnings for the latest quarter, with EPS predicted down at $0.95 compared to Q3’s $1.35.

UK election campaign

Finally, on the political front we get a rest from Brexit as the UK General Election campaign kicks off this week. For sterling traders the polls will be the new headline risk as they try to assess the chances of the Conservative Party winning and managing to get the withdrawal agreement bill signed, sealed and delivered by Jan 31st.

Corporate diary

Pre-MarketNovember 4th Ryanair – Q2 earnings report
Pre-market November 4th Credit Agricole – Q3 earnings report
After-Market November 4th Uber – Q3 earnings report
Pre-MarketNovember 5thImperial Brands – Q4 earnings report
Pre-MarketNovember 6thAdidas – Q3 earnings report
07.00 GMTNovember 6thSoftbank – Q2 earnings report
07.30 GMTNovember 6thWirecard – Q3 earnings report
09.00 GMT November 6th BMW – Q3 earnings report
21.45 GMT November 6th QUALCOMM
Pre-MarketNovember 7thSiemens AG – Q4 earnings report
After-MarketNovember 7thWalt Disney – Q4 earnings report

Coming up on XRay

Watch live or catch up on YouTube. Plus, if you subscribe via the MARKETSX platform, you can submit questions in real time.

08.15 GMTEvery DayEuropean Morning Call
10.00 GMTNov 4thSupply & Demand – Approach to Trading
16.45 GMTNov 5thAsset of the Day: Oil Outlook
12.00 GMTNov 6thLive Analysis: Midweek Lunch Wrap
19.00 GMTNov 7thThe Stop Hunter’s Guide to Technical Analysis – Part 10

Key Economic Events

There’s a lot going on in the coming week, here are the events we to watch out for.

00.30 GMTNov 4thAustralia Retail Sales
03.30 GMTNov 5thRBA Interest Rate Decision and Statement
09.30 GMTNov 5thUK Services PMI
15.00 GMTNov 5thUS ISM Non-Manufacturing PMI
21.45 GMTNov 5thNew Zealand Employment Change / Jobless Rate
00.30 GMTNov 7thAustralia Balance of Trade
12.00 GMTNov 7thBoE Monetary Policy Decision & Inflation Report
12.30 GMTNov 7thBoE Carney Speech
00.30 GMTNov 8thRBA Monetary Policy Statement
13.30 GMTNov 8thCanada Employment Change and Unemployment Rate

Week Ahead: Brexit crunch time, US earnings season kicks off

Forex
Indices
Week Ahead

Welcome to your guide to the week ahead in the markets.

European Council Summit 

It’s make or break time for Brexit. EU heads of state hold their next summit this week, starting on Thursday. The meeting also marks UK Prime Minister Boris Johnson’s last chance to agree a Brexit deal, but the UK’s latest proposals have not met a warm reception. If nothing is forthcoming, the recently passed Benn Act obligates the PM to request an extension by Saturday at the latest. Boris seems to have some plan to circumnavigate the legislation, although Downing Street is unsurprisingly quiet on the details. 

Earnings Season 

The third quarter earnings season on Wall Street gets underway this week, with S&P 500 companies seen posting a year-on-year earnings per share decline for the third straight quarter. 

As usual banks get the season off to a start. Financials posted decent gains in Q3, boosted by a strong +4.5% gain in September.  

JP Morgan (Tuesday) is expected to deliver EPS of $2.45. In Q2 the company reported net income up 16% to $9.65 billion from last year’s $8.32 billion. EPS beat the $2.50 expected at $2.82, rising from $2.29 in the same quarter a year before. Net interest income is the concern in early September at the Barclays conference boss Jamie Dimon said he sees full-year 2019 net interest income down $500M from the last guidance.  

Citigroup (Tuesdayposted good numbers in Q2 as well with EPS of $1.95 topping the $1.80 expected, although trading revenues were down. For Q3 the Street expects EPS growth of c13% at $1.97 a share. Revenues are expected to rise a little less than 1% to $18.54bn. 

Wells Fargo (Tuesday) beat in Q2 but lower net interest income and comments about higher expenses acted as a drag. EPS for Q3 is seen as at $1.20, up 5.3% year-on-year, on revenues seen –5% at $20.85bn. In September the bank’s CFO lowered the net interest income for the third time in five months, with the company now seeing this key profit metric down 6% this year compared with 2018. Bulls will be clinging to anything positive on net interest income. 

Netflix (Wednesday) has had a tough comedown and Wall Street has turned cold on the stock as the risk of a competitive spiral from the rise of rival streaming services threatens to derail the company’s remarkable growth. Investors have shown concern about subscriber growth rates that have started to falter. In Q2 global net adds of 2.7m massively missed expectations for 5m.  

Eco data 

On the high frequency economic data front we are looking at the RBA meeting minutes and Chinese inflation figures early on Tuesday, with the German ZEW economic sentiment survey likely to be key for the European session. 

Wednesday sees the CPI inflation numbers for the UK and Canada, with US retail sales also in focus. 

Thursday, we have the Australian unemployment data, which is a key factor in the RBA’s thinking on monetary policy, before the Phill Fed manufacturing index ahead of the US session. 

On Friday the focus will be the data out of China, with GDP, industrial production and fixed asset investment figures due. 

Tentatively scheduled for Friday is the US Treasury Currency Report, which outlines countries that the US deems currency manipulators.

Corporate Diary

Earnings season is upon us again, here are the notable releases this week.

October 15thJPMorgan Chase & Co
October 15thJohnson & Johnson
October 15thWells Fargo & Co
October 15thCitigroup
October 16thIBM
October 16thNetflix
October 17thMorgan Stanley
October 17thPhilip Morgan
October 18thAmerican Express

 Coming Up in XRay

There are plenty of great sessions coming up on XRay this year. Watch them live on XRay or catch up in a time to suit you.

Don’t forget to ask your questions in advance to xray@markets.com

07.15 GMTOct 14thEuropean Morning Call
10.00 GMTOct 14thLIVE Earnings Season Preview
15.45 GMTOct 15thAsset of the Day: Oil Outlook
19.00 GMTOct 15th LIVE Trader Training
18.00 GMTOct 17thThe Stop Hunter’s Guide to Technical Analysis (Part 7)

Key Economic Events

There are lots of releases this week that are likely to impact the markets. Also remember that trade tensions and Brexit rumble on which make also cause volatility.

09.30 GMTOct 15thRBA Monetary Policy Meeting Minutes
09.00 GMTOct 15thGerman ZEW Economic Sentiment
08.30 GMTOct 16thUK CPI
12.30 GMTOct 16thUS Retail Sales
14.30 GMTOct 16thEIA Crude Oil Inventories
00.30 GMTOct 17thAustralia Employment Change, Unemployment Rate
08.30 GMTOct 17thUK Retail Sales
12.30 GMTOct 17thPhilly Fed Manufacturing
02.00 GMTOct 18thChina GDP, Industrial Production

The US and China are set to restart trade talks

Forex
Indices
Week Ahead

Welcome to your guide to the week ahead in the markets. This week, US-China trade talks, US inflation, Brexit gets closer and UK GDP announced.

US-China trade talks

The US and China are due to restart high-level trade talks on Thursday (Oct 10th) as the two sides try to hammer out an agreement on reducing tariffs. Failure to reach agreement will likely mean an escalation in tariffs and may spark fears in the market of a greater slowdown in economic activity. The White House delayed imposing tariffs on a large chunk of Chinese imports from Oct 1st until Oct 15th, whilst a range of goods have been exempted until Dec 15th. At the very least market watchers will be eyeing whether these delays can be extended, or the tariffs even scrapped. However, hopes for a comprehensive deal on trade remain low at this stage.

US inflation

The last three readings of the core CPI have shown a steady march higher in inflation, raising the prospect that the Fed could have to walk back on its rate cut ambitions should higher inflation take hold. In the 12 months through August, the core CPI increased 2.4%, the most since July 2018, after climbing 2.2% in July.

Brexit marches closer

We cannot take our eyes off the political developments in the UK as the deadline for Brexit approaches on October. In the next few days we should expect MPs, the government and the EU do a merry dance as the clock ticks down to the key European Council meeting on Oct 17th. Uncertainty is the only certainty and the pound will remain highly exposed to headline risk.

UK GDP

The monthly UK GDP figures will be closely watched in the wake of the soft PMI readings last week, which showed that the economy is close to recession. Markets increasingly think that whatever the outcome on Brexit, the Bank of England will have to cut rates before it thinks about hiking.

Heads Up On Earnings

Earnings season make be over, but there are still a few companies publishing. Make a note of these dates:

Oct 8thLevi StraussQ3
Oct 8thYUM! Brands IncQ3
Oct 9thGVC HoldingsQ3

Watch the Week Ahead on XRay

There’s a lot going on this week, and we discuss the headlines in our XRay videos. Watch live or catch-up at a convenient time.

Don’t forget to email xray@markets.com any questions you have and our hosts will try to answer them.

07.15 GMTOct 7thEuropean Morning Call
15.00 GMTOct 7thCharmer Trading talks Forex
15.45 GMTOct 8thAsset of the Day: Oil Outlook
13.00 GMTOct 9thAsset of the Day: Indices Insights
12.30 GMTOct 10thUS CPI LIVE
18.00 GMTOct 10th The Stop Hunter’s Guide to Technical Analysis (Part 6)

Key Economic Events

There are quite a lot of data published this week. Here are the top events to put in your diary.

07.30 GMTOct 7th UK Halifax House Price Index
08.30 GMTOct 7th EZ Sentix Investor Confidence
00.30 GMTOct 8thNAB Business Confidence (Australia)
TentativeOct 8thChina Trade Balance
12.30 GMTOct 8thUS Core PPI
00.30 GMTOct 9thAustralia Westpac Consumer Sentiment
14.30 GMTOct 9thEIA Crude Oil Inventories
18.00 GMTOct 9thFOMC Meeting Minutes
08.30 GMTOct 10thUK GDP
12.30 GMTOct 10thUS CPI Inflation
12.30 GMTOct 11thCanada Employment Change

Week Ahead: Nonfarm payrolls, China PMIs and Eurozone inflation on tap

Forex
Week Ahead

Welcome to your guide to the week ahead in the markets. China trade talks are ushered in by PMI data, Eurozone inflation results and US nonfarm payroll reports.

US nonfarm payrolls 

The set-piece US labour market report on Friday is the main eco event for market watchers. Signs of a slowdown in employment growth are showing, supporting the doves’ case for further rate cuts. Will we see stronger wage growth though? The NFP report missed expectations on the headline number with employers adding just 130k last month versus the 160k expected. 

China data ahead of trade talks 

The week gets a kickstart with more economic data from China likely to give more clues about the impact of the trade war. The official manufacturing and services PMIs will be followed by the closely-watched private Caixin manufacturing survey in the early hours of Monday. 

Eurozone inflation 

The European Central Bank has cut rates, so what now? Inflation has proved stubbornly weak in the Eurozone, with headline inflation in August of just 1%, while core inflation was a meagre 0.9%. Market expectations for inflation remain subdued. There seems little hope that inflation will start to tick higher and give the ECB some breathing space. Euro area CPI preliminary readings will be delivered on Tuesday morning. 

Brexit 

MPs are back to business, but we don’t know where this leaves the only thing that matters for sterling right now – will there be a deal or not? GBP pairs will remain exposed to headline risk as the market tries to figure out which way the wind is blowing. 

RBA  

The Reserve Bank of Australia is expected to cut interest rates again when it convenes on Tuesday. Speaking last week, governor Philip Lowe gave a very strong signal that rates would be cut again from the current record low 1%.  

Corporate Diary

There are several corporate data releases this week, here are the main ones to put in your diary.

Oct 1stFerguson FY 19 Full Year Results
Oct 1stGreggsQ3 Trading Update
Oct 2ndTesco Interim Results
Oct 3rdPepsicoQ3 Earnings
Oct 3rdTed Baker Interim Results
Oct 3rdH&M GroupQ3 Results

Coming Up on XRay

Don’t miss our upcoming video streams on XRay. You can watch them live directly through the platform or catch-up afterwards when it suits you.

07.15 GMTSept 30thEuropean Morning Call
15.00 GMTSept 30thCharmer Trading talks Forex
15.45 GMTOct 1stAsset of the Day: Oil Outlook
19.00 GMTOct 1stLive Trader Training
18.00 GMTOct 3rdThe Stop Hunter’s Guide to Technical Analysis (part 5)
12.30 GMTOct 4thLIVE Nonfarm Payrolls Coverage

Key Economic Events

There’s a lot of data coming out in the next few days, particularly at the start of the week.

01.00 GMTSept 30thChina Manufacturing and Services PMIs
01.00 GMTSept 30thANZ Business Confidence
01.45 GMTSept 30th China Caixin PMI
08.30 GMTSept 30thUK Final QoQ GDP
12.00 GMTSept 30th Germany CPI Inflation YoY
03.30 GMTOct 1stRBA Interest Rate Decision and Statement
08.30 GMTOct 1stUK Manufacturing PMI
09.00 GMTOct 1st Eurozone Preliminary CPI
14.00 GMTOct 1stUS ISM Manufacturing PMI
12.15 GMTOct 2ndUS ADP Nonfarm Employment
14.30 GMTOct 2ndUS Crude Oil Inventories
08.30 GMTOct 3rdUK Services PMI
12.30 GMTOct 4th US Nonfarm Payrolls

Week Ahead: Brexit courtroom drama, US inflation and euro area PMIs

Forex
Week Ahead

Welcome to your guide to the week ahead in the markets. This week, Brexit is inescapable and Euro data comes in.

UK Supreme Court ruling 

One thing is certain – the Brexit comedy/tragedy will continue this week following the drama of the Supreme Court. Boris Johnson will find out this week whether his decision to suspend Parliament was legal. Meanwhile rumours of the chances of a ‘deal’ between the UK and EU will no doubt do the rounds. 

Sterling will remain exposed to headline risk and be more volatile than peers, although until there is real clarity, GBP pairs may lack direction over the coming days. 

US PCE inflation 

The Fed is relaxed about the uplift in the core CPI readings, which jumped to 2.4% last time out. On Friday markets will be focused on the Fed’s preferred inflation gauge – core PCE. 

While announcing a quarter point cut to rates last week, FOMC members left their inflation expectations for this year and next unchanged. If the PCE gauge follows the CPI indicator, there may be some concern that inflation is rising faster than policymakers are forecasting. 

Eurozone data 

Following the ECB interest rate cut, markets are shifting to eco data to show whether there’s any sign of uplift in the Eurozone economy. Flash manufacturing and services PMIs are due Monday, while the German Ifo business climate report is released on Tuesday. 

RBNZ decision 

Reserve Bank of New Zealand governor Orr has said the central bank is in wait and see mode as it assesses the impact of cuts this year. Markets don’t expect any change to the main cash rate on Wednesday, but recent GDP slowing does suggest the RBNZ will maintain its easing bias and accommodative stance. 

Corporate Diary

Keep these dates in your diary, as results come out for Manchester United, Nike and more.

Sept 23rdCintasQ1 2020
Sept 23rd Manchester UnitedQ4
Sept 24thNikeQ1 2020
Sept 26thAccentureQ4

Coming Up on XRay

It’s a busy week on XRay, make sure you don’t miss out on these live video sessions. Tune in live, or watch on catch-up when it suits you.

07.15 GMTSept 23rdEuropean Morning Call
17.00 GMTSept 23rd Blonde Markets
15.45 GMTSept 24thAsset of the Day: Oil Outlook
19.00 GMTSept 25th Asset of the Day: Indices Insights
18.00 GMT Sept 26thThe Stop Hunter’s Guide to Technical Analyis (Part 4)

Key Economic Events

Lots of US and Euro data out this week, so expect to see some reaction in the currency markets.

07.15-08.00 GMTSept 23rdEurozone Flash PMIs
13.45 GMTSept 23rdUS Flash Manufacturing PMI
08.00 GMTSept 24thGerman IFO Business Climate
14.00 GMTSept 24thUS CB Consumer Confidence
02.00 GMTSept 25thRBNZ Official Cash Rate and Statement
14.30 GMTSept 25thUS Crude Oil Inventories
12.30 GMTSept 26th US Final GDP
12.30 GMTSept 27thUS PCE Inflation, Core Durable Goods

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