The Global Week Ahead gets dominated by central banks, for a 2nd week in a row.

Forget S&P 500 earnings estimates for the time being. Financial market trading has been fully tied to fresh key macro data and macro-driven policy events these days.

On Monday, the People’s Bank of China (PBoC) offers up an interest rate decision.

On Wednesday, Fed Chair Powell speaks to the Senate Banking Committee.

Next in importance, any details on the European Central Bank’s (ECB) plan to prevent rate hikes from hurting weaker Euro Area economies. That will be of interest to traders.

In emerging markets, there's no let-up in rate-hike fever:

• - Expect central banks in Indonesia and Mexico to raise rates.
• - Egypt and the Czech Republic central banks are up to bat, too.
• - One major outlier here dismisses a need for tightening: Turkey. That central bank updates Thursday.

Of all the major developed countries’ central banks which until recently dismissed consumer price inflation as transitory, one still stands out: the Bank of Japan.

But Reuters writes that it is increasingly being challenged by hedge funds, which are betting it can't hold the line on super-loose policy forever.

Next are Reuters’ five world market themes, reordered for equity traders:

(1) Wednesday, Fed Chair Powell testifies before the Senate Banking Committee

Fresh off the Federal Reserve's biggest rate hike in nearly three decades, Fed Chair Jerome Powell will be in the spotlight on Wednesday when he testifies before the Senate Banking Committee.

Blistering inflation forced the Fed to raise interest rates by 75 basis points on June 15 and flag a faster rate-rise path. But it also projected a slowing economy and rising unemployment, highlighting a tricky balancing act ahead.

The testimony will allow Powell to hammer home his determination to quell inflation.

But with the S&P 500 down -20% from January record highs and other asset prices also falling, he may be quizzed for details on how the Fed can tame inflation without causing too many ructions in the economy and markets.

(2) Last week, the European Central Bank promised added support. Of what type?

The ECB is promising additional support for the euro bloc's indebted southern rim, looking to calm the angst caused by its policy tightening plans.

So far, all we know is that the new scheme may attach some loose conditions. Investors, keen to find out what shape and form the tool might take, will be on the prowl for clues.

Bond markets reacted with relief to the ECB's plan. But investors are an impatient bunch and could soon test its resolve to contain bond market strains.

Having had to reverse course just six days after failing to reassure markets it would keep borrowing costs in check, ECB officials know the clock is ticking.

(3) Thursday, Turkey’s central bank meets. A big southern Europe crisis brewing?

Policymakers at Turkey's central bank will meet on Thursday to debate where interest rates will go. The answer, though, is already known: nowhere. That means pressure on the lira will increase further.

Despite shrinking FX reserves and inflation above 70%, interest rates are stuck at 14%, due to President Tayyip Erdogan's push for lower rates.

Instead, a number of measures — widely seen as failing to address the core problem of soaring inflation — have been introduced to shield locals from the fallout of a currency that has lost some 90% of its value in the past decade.

But in other emerging markets, central banks are not dithering:

• - On Wednesday, Czech rates could rise 100 bps
• - Indonesia may kick off its tightening cycle on Thursday
• - Later that day, Mexico could raise rates by 75 bps while
• - Egypt may continue hiking after last month's 200 bps move

(4) Thursday, a number of advance June purchasing manager indices (PMIs) land

Advance readings of June purchasing managers' indexes (PMIs), due on Thursday, will make for interesting content, showing how businesses coped with this month's surge in the cost of capital and a souring in consumer sentiment.

So far this year, European and U.S. PMIs have held above the 50 mark, while Chinese zero-COVID policies dragged Asia into contraction.

Now, though, European and U.S. PMIs are going the other way, as higher borrowing costs bite. Economists polled by Reuters expect June PMIs to show further modest weakening.

PMI watchers might choose to train their sights on Asia, where readings nudged higher in May and may do so again this month, as swathes of China emerged from lockdowns and authorities stepped up investment.

And Chinese PMIs' return to expansionary territory would be a bonus for the global economy.

(5) Japan’s macro data will inform the BoJ, FX and equity markets

The Bank of Japan has defied the direction of monetary policy globally, sticking with ultra-easy settings and a vow to buy 10-year bonds every day to anchor borrowing costs.

The result is a sliding yen, a yield curve that's being bent out of shape and a bond market almost buckling in the tussle between hedge funds and policymakers.

Meanwhile, Japanese living costs are rising and as July mid-term elections approach, the BOJ may face political pressure to tone down its efforts to raise inflation.

That could intensify if inflation data due on Friday shows above-target price growth for a second month in a row.

Top Zacks #1 Rank Stocks

Oil & Gas companies continue to dominate our #1 list. But I am bored with that.

Here is what else I found.

(1) Baidu (BIDU Quick QuoteBIDU - Free Report) : Yes. The big mainland China internet search name.

I see a $137 share price and a $47.5B market cap. The Zacks Value score is C, the Zacks Growth score is D and the Zacks Momentum score is C.

(2) Dollar Tree (DLTR Quick QuoteDLTR - Free Report) : Hmmm. A deep discount U.S. retail store made our #1 list.

I see a $151 share price and a market cap of $33.9B. The Zacks Value score is D, the Zacks Growth score is B and the Zacks Momentum score is D.

(3) Dell Technologies (DELL Quick QuoteDELL - Free Report) : The PC supplier made the #1 list too, though their narrative is now that they are an Info Tech solutions provider. The company's operating segment consists of Client Solutions, the Enterprise Solutions Group and the Dell Software Group.

I see a $46 share price and a $33.9M market cap. The Zacks Value score is A, the Zacks Growth score is B and the Zacks Momentum score is D.

I found this interesting: Tech sector stocks in the USA offer investors great value. Now.

The Nasdaq did lead us down.

Nasdaq’s forward P/E got slashed -41% from its recent peak. That is similar to the tech stock drawdown seen during the Sept. 2008 meltdown.

Back then, the tech stock down draft did not end there. Nasdaq share values went down another -10%.

Is this time different?

Key Global Macro

The week leads with a People’s Bank of China interest rate decision.

Manufacturing PMIs out on Thursday will be significant.

On Monday, the People’s Bank of China (PBoC) interest rate was kept unchanged at a one-year loan prime rate of 3.70%, while the 5-year reference rate for mortgages was left steady at 4.45%.

On Tuesday, the Reserve Bank of Australia’s (RBA) Lowe gives a speech.

U.S. existing home sales for May should be 5.39M, down from 5.61M the month prior.

On Wednesday, there is a non-monetary policy European Central Bank (ECB) meeting.
Fed Chair Powell testifies.

On Thursday, a two-day European Union (EU) leader’s summit begins. Someone in the U.K. needs to explain to me: Why is it now better that the U.K. is not a part of this group?

The U.S. global manufacturing PMI should be strong at 57.3, in line with the prior month’s 57.0.

On Friday, the University of Michigan consumer sentiment index for June should be confirmed to be sitting at a very low 50.2.

Conclusion

I wrote to start that earnings estimates are not the driver of stocks these days.

That is fully true.

But Q2 will wrap up in a couple weeks’ time. Then, we will see Q2 earnings flood in across July.

On that forward note, here is what Zacks Research Director Sheraz Mian had for us, on June 15th:

• - For 2022 Q2, total S&P 500 earnings are expected to increase +2.1% from the same period last year on +9.6% higher revenues and net margin compression of 95 basis points.
• - Excluding the hefty contribution from the Energy sector, total Q2 earnings for the rest of the S&P 500 index are expected to be down -5.1% on +7.4% higher revenues.
• - Looking at the calendar-year picture, total S&P 500 earnings are expected to be up +9.0% in 2022 and +9.0% in 2023. On an ex-Energy basis, total 2022 index earnings would be up +3.7% (instead of +9.0%, with Energy).

Note that +9.0 annual 2022 S&P 500 earnings drop to +3.7% with Energy?

That strikes me as the fly in the ointment. All we need is for global oil prices to collapse, and a great deal of annual earnings growth evaporates.

Then again, that is bearish writing. This bear market likely has fully-priced that idea in.

That’s it for me.

Have a great trading week.

Warm Regards,

John Blank
Zacks Chief Equity Strategist and Economist