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In the Global Week Ahead, the main event is the start of third-quarter U.S. earnings season.
The big U.S. money center banks report this week.
Here is what Zacks Research Director Sheraz Mian wrote—
“On the core banking side, we don’t expect any notable improvement in performance, with the market looking for evidence that the long-awaited loan growth trend has finally arrived. Net interest margin likely ticked up in Q3 on the back of the September rise in treasury yields:
- While we don’t expect much on the core banking side, we do expect strong numbers in the capital markets business, particularly on
- The investment banking side, while
- Trading revenues are faced with tough comparisons to the year-earlier period.
- Trading revenues are expected to be below the year-earlier period, with fixed income weakness offsetting equities strength.
- The advisory side of the business continued to hum, with M&A activities continuing their record volume from the preceding period.
“For the Zacks Major Banks Industry, which includes these major banks and account for roughly 45% of the Finance sector’s total earnings:
- Q3 earnings are expected to be up +11.2% on +2.5% higher revenues.
- This would follow +298.1% earnings growth on -2.1% lower revenues in the preceding period (2021 Q2).
“For the Finance sector as a whole, total Q3 earnings are expected to be up +19.9% on +4.9% higher revenues.”
Next are Reuters’ five world market themes, reordered for equity traders.
(1) Q3 Earnings Season Begins – Big Banks on Deck This Week
Some of the world's biggest banks kick off U.S. earnings, just as investors fret over inflation, surging energy prices and the upcoming tapering of the Federal Reserve's $120 billion monthly stimulus.
Banks smashed profit estimates in the second quarter as the economy rebounded, with Wells Fargo (WFC - Free Report) , Bank of America Corp. (BAC - Free Report) , Citigroup (C - Free Report) and JPMorgan Chase (JPM - Free Report) posting a combined $33 billion in profits.
That momentum likely slowed in the third quarter; earnings for financials are forecast to grow by +17.4%, versus nearly 160% in Q2, according to I/B/E/S data from Refinitiv.
Wider S&P 500 index earnings are expected to grow by 29.4%, putting them on track to outpace those of the financial sector for the first time in five quarters. BlackRock (BLK - Free Report) and JPMorgan report Wednesday; Bank of America, Wells Fargo, Morgan Stanley and Goldman Sachs later in the week.
(2) The Story of the U.S. Dollar
Funds rebalancing portfolios and U.S. banks rushing to meet cash reserve rules tend to lift the dollar towards the end of each year. This year there are even more sources of support.
First, the Fed looks set to taper stimulus. "Real" U.S. yields -- adjusted for inflation -- are deeply negative, but at -0.9%, compare favorably to Germany's -1.9%. With the ECB in no rush to tighten policy, the gap could widen.
Second, as economic growth moderates, stocks have fallen and boosted demand for safer assets including the dollar. The rally in commodities, traded mainly in dollars, is another inducement to buy the greenback.
Unsurprisingly, the premium to access greenbacks is rising; euro-dollar three-month swap spreads are around 16 basis points, more than double end-September levels.
Headwinds?
Markets could "sell the fact" once tapering happens.
Another risk is the debt ceiling deadline, kicked out to Dec. 3; a default while unlikely, could prove catastrophic. But even then, the dollar could catch a bid, as it did in 2008.
(3) Keep an Eye on Chinese Macro Data
As stagflation fears simmer globally, China's economy gets a crucial health check, with data spanning bank lending to trade and inflation.
Thursday's factory gate prices for September are in focus after surging to 13-year peaks in August on soaring raw material costs. Those costs have only gone up since, including ever-higher coal prices. The government is rationing power to heavy industry, causing factory output to contract.
The crisis is fanning worries about a slowdown, given contagion risks from Evergrande’s debt woes and Beijing's crackdown on tech firms.
While the impact is being felt as far as Wall Street, China's neighbors and biggest trading partners may bear the brunt.
(4) Lots of U.K. Macro Data
As Britain's economy shows signs of slowing amid rising prices, supply chain disruptions and staff shortages, upcoming data releases will grab attention.
On Tuesday, the September unemployment count is published, with August unemployment rates and wage data. August gross domestic product data is released on Wednesday, alongside industrial and manufacturing numbers.
Markets are betting the Bank of England will join its peers and raise interest rates in February. But while British gilt yields have surged, the expectations have done nothing to lift sterling.
(5) The IMF and World Bank Meetings Happen
The great and good of central banking, finance and politics, come together at the annual World Bank and IMF meetings from Monday.
There's plenty to chew over: The global lender will unveil its new economic projections, plans to redistribute $650 billion of SDRs — the IMF's own currency — to help poorer nations, while Ireland has dropped its opposition to overhauling global tax rules.
But the elephant in the room is the future of IMF Chief Georgieva after claims she pressured World Bank staff to alter data to favor China while in her previous role. The allegations — firmly rejected by Georgieva — will cast a cloud over the fund's initiatives to aid the world's post-pandemic recovery.
Top Zacks #1 Rank (STRONG BUY) Stocks
Let’s take a look at 3 darling tech stocks.
Salesforce (CRM - Free Report) : This is a $272 stock with a market cap of $266.8B. I have a Zacks Value score of F, a Zacks Growth score of F and a Zacks Momentum score of F.
Square (SQ - Free Report) : This is a $238 stock with a market cap of $109.7B. I have a Zacks Value score of F, a Zacks Growth score of F and a Zacks Momentum score of B.
Roku (ROKU - Free Report) : This is a $323 stock with a market cap of $43.1B. I have a Zacks Value score of F, a Zacks Growth score of B, and a Zacks Momentum score of A.
Worry about those long-term Zacks metrics.
Key Global Macro
Looks like a light macro schedule, other than the China trade data.
On Monday, the 3M estimate for U.K. GDP in Q3 sits at +3.2%.
On Tuesday, the NFIB small business optimism index is at 1001. We get a new reading.
A new WASDE agricultural report is out in the USA.
On Wednesday, China’s exports growth (+17.1% consensus), and import growth (+22.3% consensus) come out. Neither shows signs of slowing down.
The U.S. core CPI should be +4.0% in September. Same as last month.
On Thursday, the Australian unemployment rate should be 4.8% in September.
On Friday, the IMF and World Bank meetings happen.
U. of Michigan consumer confidence should be at 74, up from 72.8 last month.
Conclusion
I would not think major U.S. banks earnings deliver much momentum, heading into the rest of this Q3 earnings season.
Big, big issues (ones that concern traders and investors) are found in global supply chains.
Major bank reports are not going to provide any insights into that major issue.
Have a great trading week!
Regards,
John Blank
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Time for the Big Banks: Global Week Ahead
In the Global Week Ahead, the main event is the start of third-quarter U.S. earnings season.
The big U.S. money center banks report this week.
Here is what Zacks Research Director Sheraz Mian wrote—
“On the core banking side, we don’t expect any notable improvement in performance, with the market looking for evidence that the long-awaited loan growth trend has finally arrived. Net interest margin likely ticked up in Q3 on the back of the September rise in treasury yields:
“For the Zacks Major Banks Industry, which includes these major banks and account for roughly 45% of the Finance sector’s total earnings:
“For the Finance sector as a whole, total Q3 earnings are expected to be up +19.9% on +4.9% higher revenues.”
Next are Reuters’ five world market themes, reordered for equity traders.
(1) Q3 Earnings Season Begins – Big Banks on Deck This Week
Some of the world's biggest banks kick off U.S. earnings, just as investors fret over inflation, surging energy prices and the upcoming tapering of the Federal Reserve's $120 billion monthly stimulus.
Banks smashed profit estimates in the second quarter as the economy rebounded, with Wells Fargo (WFC - Free Report) , Bank of America Corp. (BAC - Free Report) , Citigroup (C - Free Report) and JPMorgan Chase (JPM - Free Report) posting a combined $33 billion in profits.
That momentum likely slowed in the third quarter; earnings for financials are forecast to grow by +17.4%, versus nearly 160% in Q2, according to I/B/E/S data from Refinitiv.
Wider S&P 500 index earnings are expected to grow by 29.4%, putting them on track to outpace those of the financial sector for the first time in five quarters. BlackRock (BLK - Free Report) and JPMorgan report Wednesday; Bank of America, Wells Fargo, Morgan Stanley and Goldman Sachs later in the week.
(2) The Story of the U.S. Dollar
Funds rebalancing portfolios and U.S. banks rushing to meet cash reserve rules tend to lift the dollar towards the end of each year. This year there are even more sources of support.
First, the Fed looks set to taper stimulus. "Real" U.S. yields -- adjusted for inflation -- are deeply negative, but at -0.9%, compare favorably to Germany's -1.9%. With the ECB in no rush to tighten policy, the gap could widen.
Second, as economic growth moderates, stocks have fallen and boosted demand for safer assets including the dollar. The rally in commodities, traded mainly in dollars, is another inducement to buy the greenback.
Unsurprisingly, the premium to access greenbacks is rising; euro-dollar three-month swap spreads are around 16 basis points, more than double end-September levels.
Headwinds?
Markets could "sell the fact" once tapering happens.
Another risk is the debt ceiling deadline, kicked out to Dec. 3; a default while unlikely, could prove catastrophic. But even then, the dollar could catch a bid, as it did in 2008.
(3) Keep an Eye on Chinese Macro Data
As stagflation fears simmer globally, China's economy gets a crucial health check, with data spanning bank lending to trade and inflation.
Thursday's factory gate prices for September are in focus after surging to 13-year peaks in August on soaring raw material costs. Those costs have only gone up since, including ever-higher coal prices. The government is rationing power to heavy industry, causing factory output to contract.
The crisis is fanning worries about a slowdown, given contagion risks from Evergrande’s debt woes and Beijing's crackdown on tech firms.
While the impact is being felt as far as Wall Street, China's neighbors and biggest trading partners may bear the brunt.
(4) Lots of U.K. Macro Data
As Britain's economy shows signs of slowing amid rising prices, supply chain disruptions and staff shortages, upcoming data releases will grab attention.
On Tuesday, the September unemployment count is published, with August unemployment rates and wage data. August gross domestic product data is released on Wednesday, alongside industrial and manufacturing numbers.
Markets are betting the Bank of England will join its peers and raise interest rates in February. But while British gilt yields have surged, the expectations have done nothing to lift sterling.
(5) The IMF and World Bank Meetings Happen
The great and good of central banking, finance and politics, come together at the annual World Bank and IMF meetings from Monday.
There's plenty to chew over: The global lender will unveil its new economic projections, plans to redistribute $650 billion of SDRs — the IMF's own currency — to help poorer nations, while Ireland has dropped its opposition to overhauling global tax rules.
But the elephant in the room is the future of IMF Chief Georgieva after claims she pressured World Bank staff to alter data to favor China while in her previous role. The allegations — firmly rejected by Georgieva — will cast a cloud over the fund's initiatives to aid the world's post-pandemic recovery.
Top Zacks #1 Rank (STRONG BUY) Stocks
Let’s take a look at 3 darling tech stocks.
Salesforce (CRM - Free Report) : This is a $272 stock with a market cap of $266.8B. I have a Zacks Value score of F, a Zacks Growth score of F and a Zacks Momentum score of F.
Square (SQ - Free Report) : This is a $238 stock with a market cap of $109.7B. I have a Zacks Value score of F, a Zacks Growth score of F and a Zacks Momentum score of B.
Roku (ROKU - Free Report) : This is a $323 stock with a market cap of $43.1B. I have a Zacks Value score of F, a Zacks Growth score of B, and a Zacks Momentum score of A.
Worry about those long-term Zacks metrics.
Key Global Macro
Looks like a light macro schedule, other than the China trade data.
On Monday, the 3M estimate for U.K. GDP in Q3 sits at +3.2%.
On Tuesday, the NFIB small business optimism index is at 1001. We get a new reading.
A new WASDE agricultural report is out in the USA.
On Wednesday, China’s exports growth (+17.1% consensus), and import growth (+22.3% consensus) come out. Neither shows signs of slowing down.
The U.S. core CPI should be +4.0% in September. Same as last month.
On Thursday, the Australian unemployment rate should be 4.8% in September.
On Friday, the IMF and World Bank meetings happen.
U. of Michigan consumer confidence should be at 74, up from 72.8 last month.
Conclusion
I would not think major U.S. banks earnings deliver much momentum, heading into the rest of this Q3 earnings season.
Big, big issues (ones that concern traders and investors) are found in global supply chains.
Major bank reports are not going to provide any insights into that major issue.
Have a great trading week!
Regards,
John Blank