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In the Global Week Ahead, Europe’s elected leaders will keep scrambling to keep their voters lights on. Their nation’s energy shortages — caused by Russia — remain serious.
Amidst this turmoil, Volkswagen (VWAGY - Free Report) seems set on listing car maker Porsche.
Luxury electric vehicles, anyone?
On Tuesday morn, before the NYSE stock market opens, U.S. Consumer Price Inflation (CPI) data provides a big macro input.
This data hits the tape a week before the Fed's Sept. 20-21 meeting.
Meanwhile, Mainland China tries to get its banks to help spur their flagging economy.
In the U.K. on Thursday, the Bank of England (BoE) was supposed to ponder the implications of their new government's record-breaking energy package. Their meeting was postponed a week.
That country, and the world, mourns the passing of Queen Elizabeth.
On an official Bank Holiday, Monday, September 19th, senior members of the Royal Family, heads of state from across the world, and around 2,000 others have been invited to attend the Queen’s funeral at Westminster Abbey in London.
Next are Reuters’ five world market themes, reordered for equity traders—
(1) On Tuesday, U.S. CPI Data for August Lands
Tuesday's U.S. inflation data is one of the last — and perhaps the most important — pieces of data that will help the Fed decide how aggressively it needs to hike rates in September.
July's CPI report showed a surprising moderation in prices that helped spur a rebound in stocks. That rally has since faded with Fed Chair Jerome Powell warning that the Fed's single-minded fight to tame inflation could lead to economic pain.
On an annual basis, CPI increased by a weaker-than-expected +8.5% in July, with the inflation gauge coming in flat, month-over-month. Early estimates for August call for a -0.1% decline on a monthly basis, but wildcards such as volatile energy prices are keeping investors on edge.
(2) An IPO Listing of Porsche
It's been a bleak year for capital markets. But that might not detract Volkswagen from listing luxury car maker Porsche.
Volkswagen fired the IPO starting gun even as European stock markets reeled from record inflation and the Russia energy standoff. The next three weeks will be crucial as bankers gather investor feedback and begin book building.
At the high end of estimates – investors expect a valuation between 60-85 billion euros ($60.4-$85.5 billion) - the IPO could be the largest in German history and the biggest in Europe since 1999, Refinitiv data showed.
Porsche will only backtrack on its stock market debut if "severe geopolitical problems arise", the sportscar brand's chief financial officer said on Tuesday. The Frankfurt Stock Exchange has only seen two SPACs and one small primary listing in 2022.
($1 = 0.9939 euros)
(3) Europe Out of Natural Gas
Faced with soaring energy prices that threaten to spark social unrest, necessitate rationing and inflict a recession, Europe's leaders are scrambling to pull together radical plans to counter Russian President Vladimir Putin's gas cut-off.
Governments are spending hundreds of billions of euros to help consumers and businesses cope with runaway bills. A plan from Britain's new government could cost as much as 150 billion pounds, sending its currency to near-four decade lows.
Eurozone energy ministers gather on Friday in Brussels to set plans in motion and discuss options — including gas price caps and emergency credit lines for energy market participants, though there are no pain-free solutions in sight.
Meanwhile more oil-importing countries — for example India — are considering joining the Group of Seven wealthy nations' plan to cap the price of Russian oil, Washington said.
(4) China’s Economy Continues to Struggle
A downside surprise on Chinese inflation data on Friday cheered markets because it seems to afford policymakers plenty of room to ease and help boost a flagging economy.
But loan figures out shortly afterward pointed to the dilemma: who wants to borrow in a downturn? Loan growth is scarcely budging, and a meagre rise in August was below analysts' hopes.
The central bank has already flooded the system with cash, without improving confidence, since there is no clear path out of a deepening property crisis or COVID-19 lockdowns.
More help has been promised, but has yet to meaningfully arrive, leaving the Hang Seng (HSI) lingering near major lows and the yuan close to a two-year trough.
Data on industrial production, house prices and retail sales due on Sep. 16 will give more indications on the state of the world's second largest economy.
(5) On Thursday, the Bank of England (BoE) Was Supposed to Meet
The Bank of England has postponed its policy rate decision a week, citing the period of mourning the country is observing after the death of Queen Elizabeth II.
The BOE's Monetary Policy Committee decision will now be made on Sept. 22nd.
The Bank of England must gauge the implications for inflation from the government's huge energy bill bailout of households.
The measures will bring down price pressures in the short-term but could stoke them further ahead as consumers are spared the worst of the hit to their finances.
Many economists think the BoE will raise interest rates by a further 50 basis points — normally a huge increase but less than the 75 bps rate hike that investors had been betting on increasingly until a few days ago.
Policy makers will have a few more datapoints to chew over before then, including economic output figures for July on Monday, the latest job market readings on Tuesday and August inflation on Wednesday.
Top Zacks #1 Rank (STRONG BUY) Stocks
Stock markets may be struggling this year. Regardless, there are still overvalued stocks. The first two Zacks #1 Rank stocks I chose this week demonstrate that.
(1) Arista Networks (ANET - Free Report) : This is a $123 a share Communication Components industry stock, with a market cap of $37.4B. I see a Zacks Value score of D, a Zacks Growth score of D and a Zacks Momentum score of F.
(2) Albemarle (ALB - Free Report) : This is a $291 a share Diversified Chemical industry stock, with a market cap of $34.1B. I see a Zacks Value score of F, a Zacks Growth score of F and a Zacks Momentum score of F.
(3) ST Microelectronics (STM - Free Report) : This is a $36 a share General Semiconductor industry stock, with a market cap of $32.8B. I see a Zacks Value score of B, a Zacks Growth score of B and a Zacks Momentum score of D.
The final one, a chip stock, is much cheaper. No one likes this industry right now.
Is it time to be a value investor here?
Key Global Macro
The big macro print is clearly U.S. CPI data. That gets released by the BLS on Tuesday, Sept. 13th at 8:30 am ET.
On Monday, Mainland China’s new loans data for August hits the tape. I see 1,460B this month, versus 679B yuan the month prior.
On Tuesday, the ZEW survey on Eurozone economic sentiment for September, hits the tape. A nasty recessionary -54.9 was the prior reading.
The broad U.S. CPI data for August also shows up at 8:30 am ET. +8.5% was July’s broad metric. Ex food & energy was +5.9% in July.
On Wednesday, the U.S. PPI for August shows up. +9.8% was the July reading.
On Thursday, we should have gotten the Bank of England (BoE) decision. The prior policy rate was 1.75%. This will come out next week.
On Friday, we get a batch of Mainland China macro data. Industrial Production could be up +4.0% y/y in Aug, retail sales could be up +4.0% y/y in Aug too. The latter data is usually around +10% y/y.
Euro Area HICP (their CPI) should be +9.1% y/y in August. That is the same as the prior July reading. Ex (F, E, A, T), which amounts to a ‘core’ reading, was +4.3% y/y in July.
Conclusion
There is no doubt about it.
The CPI data in the USA and the HICP data in the Eurozone are the key macro data out this week.
The consensus is not looking for much change in either. Let’s see what markets think, when the fresh data land.
As for a Q3 earnings preview?
Here is what Zacks Research Director Sheraz Mian wrote on Sept. 7th, 2022:
“The Q3 earnings season will really get going in mid-October when JPMorgan (JPM - Free Report) and other big banks come out with results.
“But early reports start trickling sooner, with this week’s Oracle (ORCL - Free Report) report for the company’s fiscal period ending in August counted as one early Q3 report.
W’e will have Costco (COST - Free Report) , FedEx (FDX - Free Report) and others come out with similar early Q3 results, too.
(1) Estimates for the last two quarters of this year and full-year 2023 are coming down.
“Positive revisions to the Energy sector partly offset estimate cuts elsewhere.
(2) The +1.4% earnings growth expected for the S&P500 index in Q3-2022 is down from +7.2% to start with.
“Excluding Energy, Q3 earnings are down -5.3% at present, a significant decline from +2.1% at the beginning of July.
(3) Q3 estimates got cut for 14 of 16 Zacks sectors since the quarter got underway.
“The biggest declines are from the Consumer Discretionary, Consumer Staples, Technology, Retail and Conglomerates sectors.
(4) On the positive side, Q3 estimates have gone up the most for the Energy sector.
“The revisions trend has been positive for the Auto sector as well.”
That’s it for me.
Have a great trading week.
Warm Regards,
John Blank Zacks Chief Equity Strategist and Economist
See More Zacks Research for These Tickers
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CPI Data Arrives Tuesday Morn: Global Week Ahead
In the Global Week Ahead, Europe’s elected leaders will keep scrambling to keep their voters lights on. Their nation’s energy shortages — caused by Russia — remain serious.
Amidst this turmoil, Volkswagen (VWAGY - Free Report) seems set on listing car maker Porsche.
Luxury electric vehicles, anyone?
On Tuesday morn, before the NYSE stock market opens, U.S. Consumer Price Inflation (CPI) data provides a big macro input.
This data hits the tape a week before the Fed's Sept. 20-21 meeting.
Meanwhile, Mainland China tries to get its banks to help spur their flagging economy.
In the U.K. on Thursday, the Bank of England (BoE) was supposed to ponder the implications of their new government's record-breaking energy package. Their meeting was postponed a week.
That country, and the world, mourns the passing of Queen Elizabeth.
On an official Bank Holiday, Monday, September 19th, senior members of the Royal Family, heads of state from across the world, and around 2,000 others have been invited to attend the Queen’s funeral at Westminster Abbey in London.
Next are Reuters’ five world market themes, reordered for equity traders—
(1) On Tuesday, U.S. CPI Data for August Lands
Tuesday's U.S. inflation data is one of the last — and perhaps the most important — pieces of data that will help the Fed decide how aggressively it needs to hike rates in September.
July's CPI report showed a surprising moderation in prices that helped spur a rebound in stocks. That rally has since faded with Fed Chair Jerome Powell warning that the Fed's single-minded fight to tame inflation could lead to economic pain.
On an annual basis, CPI increased by a weaker-than-expected +8.5% in July, with the inflation gauge coming in flat, month-over-month. Early estimates for August call for a -0.1% decline on a monthly basis, but wildcards such as volatile energy prices are keeping investors on edge.
(2) An IPO Listing of Porsche
It's been a bleak year for capital markets. But that might not detract Volkswagen from listing luxury car maker Porsche.
Volkswagen fired the IPO starting gun even as European stock markets reeled from record inflation and the Russia energy standoff. The next three weeks will be crucial as bankers gather investor feedback and begin book building.
At the high end of estimates – investors expect a valuation between 60-85 billion euros ($60.4-$85.5 billion) - the IPO could be the largest in German history and the biggest in Europe since 1999, Refinitiv data showed.
Porsche will only backtrack on its stock market debut if "severe geopolitical problems arise", the sportscar brand's chief financial officer said on Tuesday. The Frankfurt Stock Exchange has only seen two SPACs and one small primary listing in 2022.
($1 = 0.9939 euros)
(3) Europe Out of Natural Gas
Faced with soaring energy prices that threaten to spark social unrest, necessitate rationing and inflict a recession, Europe's leaders are scrambling to pull together radical plans to counter Russian President Vladimir Putin's gas cut-off.
Governments are spending hundreds of billions of euros to help consumers and businesses cope with runaway bills. A plan from Britain's new government could cost as much as 150 billion pounds, sending its currency to near-four decade lows.
Eurozone energy ministers gather on Friday in Brussels to set plans in motion and discuss options — including gas price caps and emergency credit lines for energy market participants, though there are no pain-free solutions in sight.
Meanwhile more oil-importing countries — for example India — are considering joining the Group of Seven wealthy nations' plan to cap the price of Russian oil, Washington said.
(4) China’s Economy Continues to Struggle
A downside surprise on Chinese inflation data on Friday cheered markets because it seems to afford policymakers plenty of room to ease and help boost a flagging economy.
But loan figures out shortly afterward pointed to the dilemma: who wants to borrow in a downturn? Loan growth is scarcely budging, and a meagre rise in August was below analysts' hopes.
The central bank has already flooded the system with cash, without improving confidence, since there is no clear path out of a deepening property crisis or COVID-19 lockdowns.
More help has been promised, but has yet to meaningfully arrive, leaving the Hang Seng (HSI) lingering near major lows and the yuan close to a two-year trough.
Data on industrial production, house prices and retail sales due on Sep. 16 will give more indications on the state of the world's second largest economy.
(5) On Thursday, the Bank of England (BoE) Was Supposed to Meet
The Bank of England has postponed its policy rate decision a week, citing the period of mourning the country is observing after the death of Queen Elizabeth II.
The BOE's Monetary Policy Committee decision will now be made on Sept. 22nd.
The Bank of England must gauge the implications for inflation from the government's huge energy bill bailout of households.
The measures will bring down price pressures in the short-term but could stoke them further ahead as consumers are spared the worst of the hit to their finances.
Many economists think the BoE will raise interest rates by a further 50 basis points — normally a huge increase but less than the 75 bps rate hike that investors had been betting on increasingly until a few days ago.
Policy makers will have a few more datapoints to chew over before then, including economic output figures for July on Monday, the latest job market readings on Tuesday and August inflation on Wednesday.
Top Zacks #1 Rank (STRONG BUY) Stocks
Stock markets may be struggling this year. Regardless, there are still overvalued stocks. The first two Zacks #1 Rank stocks I chose this week demonstrate that.
(1) Arista Networks (ANET - Free Report) : This is a $123 a share Communication Components industry stock, with a market cap of $37.4B. I see a Zacks Value score of D, a Zacks Growth score of D and a Zacks Momentum score of F.
(2) Albemarle (ALB - Free Report) : This is a $291 a share Diversified Chemical industry stock, with a market cap of $34.1B. I see a Zacks Value score of F, a Zacks Growth score of F and a Zacks Momentum score of F.
(3) ST Microelectronics (STM - Free Report) : This is a $36 a share General Semiconductor industry stock, with a market cap of $32.8B. I see a Zacks Value score of B, a Zacks Growth score of B and a Zacks Momentum score of D.
The final one, a chip stock, is much cheaper. No one likes this industry right now.
Is it time to be a value investor here?
Key Global Macro
The big macro print is clearly U.S. CPI data. That gets released by the BLS on Tuesday, Sept. 13th at 8:30 am ET.
On Monday, Mainland China’s new loans data for August hits the tape. I see 1,460B this month, versus 679B yuan the month prior.
On Tuesday, the ZEW survey on Eurozone economic sentiment for September, hits the tape. A nasty recessionary -54.9 was the prior reading.
The broad U.S. CPI data for August also shows up at 8:30 am ET. +8.5% was July’s broad metric. Ex food & energy was +5.9% in July.
On Wednesday, the U.S. PPI for August shows up. +9.8% was the July reading.
On Thursday, we should have gotten the Bank of England (BoE) decision. The prior policy rate was 1.75%. This will come out next week.
On Friday, we get a batch of Mainland China macro data. Industrial Production could be up +4.0% y/y in Aug, retail sales could be up +4.0% y/y in Aug too. The latter data is usually around +10% y/y.
Euro Area HICP (their CPI) should be +9.1% y/y in August. That is the same as the prior July reading. Ex (F, E, A, T), which amounts to a ‘core’ reading, was +4.3% y/y in July.
Conclusion
There is no doubt about it.
The CPI data in the USA and the HICP data in the Eurozone are the key macro data out this week.
The consensus is not looking for much change in either. Let’s see what markets think, when the fresh data land.
As for a Q3 earnings preview?
Here is what Zacks Research Director Sheraz Mian wrote on Sept. 7th, 2022:
“The Q3 earnings season will really get going in mid-October when JPMorgan (JPM - Free Report) and other big banks come out with results.
“But early reports start trickling sooner, with this week’s Oracle (ORCL - Free Report) report for the company’s fiscal period ending in August counted as one early Q3 report.
W’e will have Costco (COST - Free Report) , FedEx (FDX - Free Report) and others come out with similar early Q3 results, too.
(1) Estimates for the last two quarters of this year and full-year 2023 are coming down.
“Positive revisions to the Energy sector partly offset estimate cuts elsewhere.
(2) The +1.4% earnings growth expected for the S&P500 index in Q3-2022 is down from +7.2% to start with.
“Excluding Energy, Q3 earnings are down -5.3% at present, a significant decline from +2.1% at the beginning of July.
(3) Q3 estimates got cut for 14 of 16 Zacks sectors since the quarter got underway.
“The biggest declines are from the Consumer Discretionary, Consumer Staples, Technology, Retail and Conglomerates sectors.
(4) On the positive side, Q3 estimates have gone up the most for the Energy sector.
“The revisions trend has been positive for the Auto sector as well.”
That’s it for me.
Have a great trading week.
Warm Regards,
John Blank
Zacks Chief Equity Strategist and Economist