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Scoring Winners and Losers on Brexit Drama: Global Week Ahead
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I think globally to start each week. Do you? Follow me on twitter @johnblank100
The global week ahead hands traders the immediate facts on Brexit drama.
Who lost in Brexit drama? U.K. retailers and U.K. manufacturers suffered.
Who won? USA home builders -- for sure.
Traders should note a soft but palpable June pullback in U.K. retail sales along with a sudden contraction in U.K. manufacturing, leading up to and following the whip cracking – it’s called the U.K. pound. Capital swiftly exited the U.K.
Greater U.K. policy uncertainty is the sole established long-term U.K. fact -- at the moment.
From Frankfurt, Germany during Thursday, July 21st, the ECB hits back with fresh sounds but no motion after its Governing Council monetary policy meeting.
Super Mario (Draghi) should stay the course with that incredible -0.4% central bank deposit rate and zero monetary refi rate. I think Super Mario is the driving financial fact for global risk markets, rather than any globalized UK pound aftershock from the Brexit vote. Drama underlined a need for continuation of the ECB’s zero and negative rate policy, now for longer.
What about tangible effects Brexit drama has had on the USA?
All week, traders shall inspect a bevy of fresh U.S. housing market data. When U.S. financial markets mix together historically low 1.4% 10-year U.S. Treasury rates (gratis the ECB), a thriving 4.9% unemployment labor market, and modest 2+% GDP expansion, we likely witness a slight improvement in already-high U.S. housing activity.
Interested in looking into global stocks this week? Stock futures looked green entering the open on Monday.
Industry hot spots are semiconductors and all types of miners. The wireless info tech brain inside the global economy keeps webbing itself tighter -- all the more, all the time.
Stronger iron ore miners show China keeps turning its economy around from traditional infrastructure plays. Stronger gold miners say currency debasement from negative interest rates continues to drive up the price of an ounce of gold.
For Zacks #1 Rank (STRONG BUY) stocks, look into these three:
Taiwan Semi (TSM - Free Report) : This strong $140B market cap tent-pole Taiwanese science park semiconductor stock got back to a #1 rating and has a Zacks VGM score of A. You can’t beat that. Shares trade at $27.
Rio Tinto (RIO - Free Report) : This $45B market cap Brazilian iron ore miner has a #1 rating and a Zacks VGM score of B. Shares trade at $33.
Barrick Gold : The $24 billion market cap gold miner has a #1 rating and a Zacks VGM score of B. Shares trade at $21.
Here are the key global/macro indicators —
As I wrote earlier, we get to see the first macro evidence of Brexit on the U.K. economy. It looks like U.K. retail sales will be down -0.5% m/m in June. The U.K. manufacturing PMI should fall to 47.8 from 52.1. The overall U.K. unemployment rate should be flat at 5.0%.
In the U.S., we will get fresh data on the housing market. The NAHB builders survey on Monday looks solid. U.S. building permit and starts on Tuesday look better or at least as good. U.S. existing home sales out on Thursday should be down slightly, but still strong and on a seasonal high.
In Europe, on Thursday, we get fresh monetary policy from the ECB. The deposit rate should be negative at -0.4%, the same as before. The refi rate should be zero. Incredible stuff here!
On Monday, the U.S. NAHB builders survey looks steady at 60, the same reading as before.
In Brazil, formal job creation should be -50K this month, better than the -72K from last month. But this is still a recessionary reading.
On Tuesday, the U.K. retail sales (ex-auto and fuel) comes out. The last chaotic month of June should show a -0.5% m/m drop. The retail sales number in y/y terms likely fell to 5% a year from 6% a year. That’s still solid.
The German ZEW economic sentiment index should fall to 51.8 in June, from 54.5 in the month prior. The ZEW economic sentiment index should fall to 9 from 19.2. Both of these are likely related to Brexit. Look for these to reverse down the road.
Polish industrial output likely hit 6% y/y, up from 3.5% y/y. Polish retail sales likely got to 3.7% y/y, up from 2.2% y/y.
U.S. building permits likely rose to 1150K from 1138K and housing starts rose to 1165K from 1164K.
On Wednesday, the German PPI should improve to -2.4% y/y from 2.7% y/y. It’s still deflationary though.
The average U.K. earnings (including bonus) should get to 2.3% y/y from 2.0%.
The U.K. ILO unemployment rate should be firm at 5.0%. That’s solid and exactly the same as the USA.
On Thursday, Japan’s all-industry activity index should be -1.1, falling from a +1.3.
We get a new result from the ECB on monetary policy. The Eurozone deposit rate should be flat at -0.4%. The refi rate should be flat at zero.
Brazil’s IBGE inflation rate should remain too high at 8.89%. That’s the same high reading as before. No progress seen here due to indexing.
U.S. initial claims should be 265K.
U.S. existing home sales should be 5.48 million, down from 5.53 million, but not by much.
On Friday, the Eurozone composite PMI should be 52.5, after a prior reading of 53.1. It’s is still expansionary.
The Eurozone (preliminary) services PMI should be 52.3, after a prior reading of 52.8. the Eurozone manufacturing PMI should be 52, after a prior reading of 52.
The prelim French manufacturing PMI should be 48 and the services PMI should be 49.5. That is data from before the Nice terrorist attacks.
The prelim German manufacturing PMI should be 53.4 and services PMI should be 53.2. Both readings are lower than last time around, but still strong.
The flash CIPS/Markit manufacturing PMI for the UK should go negative at 47.8, and fall from a 52.1 reading.
The flash U.S. manufacturing PMI should be 51.5, which is better than the 51.3 prior.
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Scoring Winners and Losers on Brexit Drama: Global Week Ahead
I think globally to start each week. Do you? Follow me on twitter @johnblank100
The global week ahead hands traders the immediate facts on Brexit drama.
Traders should note a soft but palpable June pullback in U.K. retail sales along with a sudden contraction in U.K. manufacturing, leading up to and following the whip cracking – it’s called the U.K. pound. Capital swiftly exited the U.K.
Greater U.K. policy uncertainty is the sole established long-term U.K. fact -- at the moment.
From Frankfurt, Germany during Thursday, July 21st, the ECB hits back with fresh sounds but no motion after its Governing Council monetary policy meeting.
Super Mario (Draghi) should stay the course with that incredible -0.4% central bank deposit rate and zero monetary refi rate. I think Super Mario is the driving financial fact for global risk markets, rather than any globalized UK pound aftershock from the Brexit vote. Drama underlined a need for continuation of the ECB’s zero and negative rate policy, now for longer.
What about tangible effects Brexit drama has had on the USA?
All week, traders shall inspect a bevy of fresh U.S. housing market data. When U.S. financial markets mix together historically low 1.4% 10-year U.S. Treasury rates (gratis the ECB), a thriving 4.9% unemployment labor market, and modest 2+% GDP expansion, we likely witness a slight improvement in already-high U.S. housing activity.
Interested in looking into global stocks this week? Stock futures looked green entering the open on Monday.
Industry hot spots are semiconductors and all types of miners. The wireless info tech brain inside the global economy keeps webbing itself tighter -- all the more, all the time.
Stronger iron ore miners show China keeps turning its economy around from traditional infrastructure plays. Stronger gold miners say currency debasement from negative interest rates continues to drive up the price of an ounce of gold.
For Zacks #1 Rank (STRONG BUY) stocks, look into these three:
Taiwan Semi (TSM - Free Report) : This strong $140B market cap tent-pole Taiwanese science park semiconductor stock got back to a #1 rating and has a Zacks VGM score of A. You can’t beat that. Shares trade at $27.
Rio Tinto (RIO - Free Report) : This $45B market cap Brazilian iron ore miner has a #1 rating and a Zacks VGM score of B. Shares trade at $33.
Barrick Gold : The $24 billion market cap gold miner has a #1 rating and a Zacks VGM score of B. Shares trade at $21.
Here are the key global/macro indicators —
As I wrote earlier, we get to see the first macro evidence of Brexit on the U.K. economy. It looks like U.K. retail sales will be down -0.5% m/m in June. The U.K. manufacturing PMI should fall to 47.8 from 52.1. The overall U.K. unemployment rate should be flat at 5.0%.
In the U.S., we will get fresh data on the housing market. The NAHB builders survey on Monday looks solid. U.S. building permit and starts on Tuesday look better or at least as good. U.S. existing home sales out on Thursday should be down slightly, but still strong and on a seasonal high.
In Europe, on Thursday, we get fresh monetary policy from the ECB. The deposit rate should be negative at -0.4%, the same as before. The refi rate should be zero. Incredible stuff here!
On Monday, the U.S. NAHB builders survey looks steady at 60, the same reading as before.
In Brazil, formal job creation should be -50K this month, better than the -72K from last month. But this is still a recessionary reading.
On Tuesday, the U.K. retail sales (ex-auto and fuel) comes out. The last chaotic month of June should show a -0.5% m/m drop. The retail sales number in y/y terms likely fell to 5% a year from 6% a year. That’s still solid.
The German ZEW economic sentiment index should fall to 51.8 in June, from 54.5 in the month prior. The ZEW economic sentiment index should fall to 9 from 19.2. Both of these are likely related to Brexit. Look for these to reverse down the road.
Polish industrial output likely hit 6% y/y, up from 3.5% y/y. Polish retail sales likely got to 3.7% y/y, up from 2.2% y/y.
U.S. building permits likely rose to 1150K from 1138K and housing starts rose to 1165K from 1164K.
On Wednesday, the German PPI should improve to -2.4% y/y from 2.7% y/y. It’s still deflationary though.
The average U.K. earnings (including bonus) should get to 2.3% y/y from 2.0%.
The U.K. ILO unemployment rate should be firm at 5.0%. That’s solid and exactly the same as the USA.
On Thursday, Japan’s all-industry activity index should be -1.1, falling from a +1.3.
We get a new result from the ECB on monetary policy. The Eurozone deposit rate should be flat at -0.4%. The refi rate should be flat at zero.
Brazil’s IBGE inflation rate should remain too high at 8.89%. That’s the same high reading as before. No progress seen here due to indexing.
U.S. initial claims should be 265K.
U.S. existing home sales should be 5.48 million, down from 5.53 million, but not by much.
On Friday, the Eurozone composite PMI should be 52.5, after a prior reading of 53.1. It’s is still expansionary.
The Eurozone (preliminary) services PMI should be 52.3, after a prior reading of 52.8. the Eurozone manufacturing PMI should be 52, after a prior reading of 52.
The prelim French manufacturing PMI should be 48 and the services PMI should be 49.5. That is data from before the Nice terrorist attacks.
The prelim German manufacturing PMI should be 53.4 and services PMI should be 53.2. Both readings are lower than last time around, but still strong.
The flash CIPS/Markit manufacturing PMI for the UK should go negative at 47.8, and fall from a 52.1 reading.
The flash U.S. manufacturing PMI should be 51.5, which is better than the 51.3 prior.