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In the Global Week Ahead, traders will be heavily influenced by consumer price inflation (CPI) data — though five big U.S. banks report Q3 earnings (BMO) on Friday, Oct. 14th.
U.S. macro data (led by the CPI out on Thursday Oct. 13th at 8:30 am ET) will no doubt be scoured for signs of a long-hoped-for FOMC "pivot" on their Fed Funds rate hiking.
According to Reuters, financial markets will also shift their macro data focus east, as key Mainland China data and policies remain in the spotlight there.
This trove of Mainland China macro data arrives, just as Beijing's once-in-five years leadership reshuffle looks set to see President Xi Jinping break with precedent, and he secures a 3rd term.
Across this week, the world’s central bank and finance chiefs gather in Washington, DC for the IMF and World Bank annual meeting — a first DC in-person meetup since 2019.
Next are Reuters’ five world market themes, reordered for equity traders—
(1) Lots of U.S. Macro Data to Study; Thursday’s CPI Most Important
U.S. inflation numbers, retail sales data, consumer sentiment gauges and minutes from the Federal Reserve’s latest meeting will give market watchers plenty to chew on.
Signs that inflation is finally starting to slip from multi-decade highs would be well received by investors, who have repeatedly had hopes dashed for that elusive pivot away from the Fed's market-punishing rate hikes. But another robust number on Thursday could bolster the case for even more hawkishness.
Wednesday's Fed minutes could lend insight on Fed thinking on the tenacity of inflation and how durable the U.S. economy is likely to be given rising borrowing costs.
Friday's retail sales and consumer sentiment data should show how U.S. consumers are faring after months of tighter monetary policy.
(2) The U.K. Economy (and Pound) Not Out of the Woods Yet
Bank of England (BoE) intervention to stem a bond market rout and a government U-turn on part of its unfunded tax-cutting plan have bought some calm to UK markets.
But the coming days will put the modest recovery in sterling and gilts to the test. It's a data-heavy week, with UK August jobs figures out on Tuesday and the August GDP estimate, industrial output data and trade balance numbers out Wednesday.
The economy is flirting with recession, and weak data could pile pressure on the government to deliver longer-term growth plans. Markets price in a 100-basis point November rate hike, meaning sharply higher borrowing costs will likely add to economic pain.
Emergency BoE bond purchases expire on Oct. 14. That could reveal just how much market nerves have been calmed.
(3) A Credit Suisse Calamity?
After an online storm of rumors over Credit Suisse's (CS) future sent its stock tumbling and default insurance cost soaring, the embattled lender will be keeping its fingers crossed that the coming days stay calm. In a bid to reassure investors, Credit Suisse ended the week by announcing a bond buyback of up to 3 billion Swiss francs ($3 billion).
The bank, beset by a series of scandals and losses, wants time to work out the final details of an overhaul to claw back the trust of skeptical investors and is set reveal its revamp plan on Oct. 27.
The only difficulty: this vision requires another throw of the dice and potentially further billions of Swiss francs in fresh capital.
And the bank's woes cast a pall over Europe's financial sector, already in the spotlight over how lenders will cope with the latest market fallout. Germany's Deutsche Bank is among those feeling the heat.
(4) A 3rd 5-year Term for China’s Xi Comes with Key Macro Data
Chinese President Xi Jinping is set to be appointed to an unprecedented third five-year term as supreme leader in the week to come.
But the days leading up to the twice-a-decade Communist party Congress will be strewn with reminders of how damaging some of his policies have been for the economy and markets.
Loan data could show how a system awash with cash still can't find borrowers, as a property crisis and crippling pandemic policy sap confidence. Exports have fallen victim to factory shutdowns as part of its pandemic counter-measures.
Investors hope for a roadmap out of the draconian zero-COVID policies, and wonder if "common prosperity" efforts will crush more than just the real-estate, hi-tech and tutoring industries.
And part of Xi's vision is a China that includes Taiwan.
(5) World Bank and IMF Annual Meetings in DC. 1st Since 2019
The who's who of finance and central banking descend on Washington for the Oct. 10-16 International Monetary Fund (IMF) and World Bank annual meeting — the first full in-person meeting since October 2019.
There is plenty to discuss. A number of developing economies are buckling under the toxic mix of high inflation, food and energy shocks, elevated borrowing costs and the fallout from climate change. Many — like Ghana, Egypt and Sri Lanka — need financial help, knocking on the door of multilateral banks, the lenders of last resort. Ukraine is pushing for a bespoke program to secure billions of funding.
But the stress is truly global, with central banks outside the United States trying to shore up their currencies against a surging dollar and the fallout from policy mistakes such as Britain's mini-budget sending tremors through markets.
Zacks #1 Rank (STRONG BUY) Stocks
Foreign stocks have been completely written off this year.
Here are three on the top of our latest #1 list.
(1) Banco Do Brasil (BDORY - Free Report) : This is a $7.80 a share Brasilia-based Foreign Bank company, with a market cap of $22.3B. I see a Zacks Value score of A, a Zacks Growth score of B and a Zacks Momentum score of F.
(2) Merck KGaA (MKGAF - Free Report) : This is a $12 a share Darmstadt, Germany-based Science and Tech company, with a market cap of $21.9B. I see a Zacks Value score of A, a Zacks Growth score of D and a Zacks Momentum score of A.
(3) Ecopetrol (EC - Free Report) : This is a $159 a share Columbia-based Oil and Gas - Emerging Markets company, with a market cap of $21.1B. I see a Zacks Value score of A, a Zacks Growth score of A and a Zacks Momentum score of D.
Someone is going to make money on these Zacks “A” Valued shares, eventually.
Key Global Macro
U.S. Consumer Price Inflation (CPI) data out on Thursday at 8:30 am ET is the focus.
On Monday, Mainland China’s M2 Money Supply data for SEPT is out: +12.2% year over year, as opposed to +10.7% y/y growth expected. New loans were 1,250B in a prior reading. We get new data on that too.
It’s a centrally-planned economy, so this data tells us how much it will grow.
On Tuesday, the IMF meeting starts in Washington, DC.
U.S. NFIB small business optimism was 91.8 last month. We get a fresh reading.
On Wednesday, the IMF meeting is ongoing.
We get the latest MBA mortgage applications for the USA, for the week of Oct. 7th. These have been down -14.2%.
The U.S. PPI comes out for SEPT. The AUG reading was +7.3% y/y, ex food and energy.
The U.S. WASDE report comes out. A key report for Agricultural Commodities.
The FOMC minutes come out.
On Thursday, the IMF meeting is ongoing.
The U.S. CPI for SEPT comes out. I see a +6.3% y/y ex-food and energy print is the prior reading.
On Friday, the IMF meeting ends.
Mainland China’s CPI for SEPT comes out. The prior is +2.5% y/y. Not sure I would trust that data. But a low value here may reflect COVID shutdowns.
The U of Michigan consumer sentiment data comes out. It has remained low at 58.6 in the prior reading. This has U.S. midterm election implications.
Conclusion
On Friday, October 14th, the official Q3 S&P500 earnings season gets underway.
On Oct. 5th, Zacks Research Director Sheraz Mian wrote this on Q3 earnings season:
“We are off to a rough start for the early 2022 Q3 results that have been coming out.”
“All of these early reports have been from companies reporting results for their fiscal quarters ending in August, which we count as part of our September-quarter tally.”
“We have seen such Q3 results from 17 S&P 500 members already.”
“Our comment about the ‘rough start’ that these results show isn’t just about the disappointing results from the likes of FedEx (FDX - Free Report) , Nike (NKE - Free Report) , Carnival (CCL - Free Report) and others, but how so few of these companies have been able to beat estimates that had already come down.”
“The proportion of these 17 S&P 500 index members beating EPS and revenue estimates is the lowest in the last 5 years.”
Here are Sheraz Mian’s five points:
(1) Estimates for the last two quarters of 2022 and full-year 2023 are coming down, even though positive revisions to Energy continue to partly offset cuts elsewhere.
(2) The +0.7% earnings growth expected for the S&P 500 index in 2022 Q3 is down from +7.2% at the start of the period.
Excluding the Energy sector, Q3 earnings are expected to be down -6.0% at present, a significant decline from +2.1% at the beginning of July.
(3) Q3 estimates were cut for 14 of 16 Zacks sectors, once reporting got underway.
Biggest sector declines come from Consumer Discretionary, Consumer Staples, Tech, Retail and Conglomerates.
(4) For a calendar-year picture, total S&P500 earnings should be up +7.0% in 2022 and +6.1% in 2023.
Ex-Energy, total 2022 index earnings would be up +0.4% (versus +7.0% with Energy).
(5) Annual 2023 earnings estimates have been coming down after peaking in mid-April.
The 2023 earnings data is down -4% from a peak for the S&P500 index as a whole, and -6.6% ex-Energy.
That’s it for me.
Warm Regards,
John Blank Zacks Chief Equity Strategist and Economist
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Big Banks Show Q3 Earnings: Global Week Ahead
In the Global Week Ahead, traders will be heavily influenced by consumer price inflation (CPI) data — though five big U.S. banks report Q3 earnings (BMO) on Friday, Oct. 14th.
U.S. macro data (led by the CPI out on Thursday Oct. 13th at 8:30 am ET) will no doubt be scoured for signs of a long-hoped-for FOMC "pivot" on their Fed Funds rate hiking.
According to Reuters, financial markets will also shift their macro data focus east, as key Mainland China data and policies remain in the spotlight there.
This trove of Mainland China macro data arrives, just as Beijing's once-in-five years leadership reshuffle looks set to see President Xi Jinping break with precedent, and he secures a 3rd term.
Across this week, the world’s central bank and finance chiefs gather in Washington, DC for the IMF and World Bank annual meeting — a first DC in-person meetup since 2019.
Next are Reuters’ five world market themes, reordered for equity traders—
(1) Lots of U.S. Macro Data to Study; Thursday’s CPI Most Important
U.S. inflation numbers, retail sales data, consumer sentiment gauges and minutes from the Federal Reserve’s latest meeting will give market watchers plenty to chew on.
Signs that inflation is finally starting to slip from multi-decade highs would be well received by investors, who have repeatedly had hopes dashed for that elusive pivot away from the Fed's market-punishing rate hikes. But another robust number on Thursday could bolster the case for even more hawkishness.
Wednesday's Fed minutes could lend insight on Fed thinking on the tenacity of inflation and how durable the U.S. economy is likely to be given rising borrowing costs.
Friday's retail sales and consumer sentiment data should show how U.S. consumers are faring after months of tighter monetary policy.
(2) The U.K. Economy (and Pound) Not Out of the Woods Yet
Bank of England (BoE) intervention to stem a bond market rout and a government U-turn on part of its unfunded tax-cutting plan have bought some calm to UK markets.
But the coming days will put the modest recovery in sterling and gilts to the test. It's a data-heavy week, with UK August jobs figures out on Tuesday and the August GDP estimate, industrial output data and trade balance numbers out Wednesday.
The economy is flirting with recession, and weak data could pile pressure on the government to deliver longer-term growth plans. Markets price in a 100-basis point November rate hike, meaning sharply higher borrowing costs will likely add to economic pain.
Emergency BoE bond purchases expire on Oct. 14. That could reveal just how much market nerves have been calmed.
(3) A Credit Suisse Calamity?
After an online storm of rumors over Credit Suisse's (CS) future sent its stock tumbling and default insurance cost soaring, the embattled lender will be keeping its fingers crossed that the coming days stay calm. In a bid to reassure investors, Credit Suisse ended the week by announcing a bond buyback of up to 3 billion Swiss francs ($3 billion).
The bank, beset by a series of scandals and losses, wants time to work out the final details of an overhaul to claw back the trust of skeptical investors and is set reveal its revamp plan on Oct. 27.
The only difficulty: this vision requires another throw of the dice and potentially further billions of Swiss francs in fresh capital.
And the bank's woes cast a pall over Europe's financial sector, already in the spotlight over how lenders will cope with the latest market fallout. Germany's Deutsche Bank is among those feeling the heat.
(4) A 3rd 5-year Term for China’s Xi Comes with Key Macro Data
Chinese President Xi Jinping is set to be appointed to an unprecedented third five-year term as supreme leader in the week to come.
But the days leading up to the twice-a-decade Communist party Congress will be strewn with reminders of how damaging some of his policies have been for the economy and markets.
Loan data could show how a system awash with cash still can't find borrowers, as a property crisis and crippling pandemic policy sap confidence. Exports have fallen victim to factory shutdowns as part of its pandemic counter-measures.
Investors hope for a roadmap out of the draconian zero-COVID policies, and wonder if "common prosperity" efforts will crush more than just the real-estate, hi-tech and tutoring industries.
And part of Xi's vision is a China that includes Taiwan.
(5) World Bank and IMF Annual Meetings in DC. 1st Since 2019
The who's who of finance and central banking descend on Washington for the Oct. 10-16 International Monetary Fund (IMF) and World Bank annual meeting — the first full in-person meeting since October 2019.
There is plenty to discuss. A number of developing economies are buckling under the toxic mix of high inflation, food and energy shocks, elevated borrowing costs and the fallout from climate change. Many — like Ghana, Egypt and Sri Lanka — need financial help, knocking on the door of multilateral banks, the lenders of last resort. Ukraine is pushing for a bespoke program to secure billions of funding.
But the stress is truly global, with central banks outside the United States trying to shore up their currencies against a surging dollar and the fallout from policy mistakes such as Britain's mini-budget sending tremors through markets.
Zacks #1 Rank (STRONG BUY) Stocks
Foreign stocks have been completely written off this year.
Here are three on the top of our latest #1 list.
(1) Banco Do Brasil (BDORY - Free Report) : This is a $7.80 a share Brasilia-based Foreign Bank company, with a market cap of $22.3B. I see a Zacks Value score of A, a Zacks Growth score of B and a Zacks Momentum score of F.
(2) Merck KGaA (MKGAF - Free Report) : This is a $12 a share Darmstadt, Germany-based Science and Tech company, with a market cap of $21.9B. I see a Zacks Value score of A, a Zacks Growth score of D and a Zacks Momentum score of A.
(3) Ecopetrol (EC - Free Report) : This is a $159 a share Columbia-based Oil and Gas - Emerging Markets company, with a market cap of $21.1B. I see a Zacks Value score of A, a Zacks Growth score of A and a Zacks Momentum score of D.
Someone is going to make money on these Zacks “A” Valued shares, eventually.
Key Global Macro
U.S. Consumer Price Inflation (CPI) data out on Thursday at 8:30 am ET is the focus.
On Monday, Mainland China’s M2 Money Supply data for SEPT is out: +12.2% year over year, as opposed to +10.7% y/y growth expected. New loans were 1,250B in a prior reading. We get new data on that too.
It’s a centrally-planned economy, so this data tells us how much it will grow.
On Tuesday, the IMF meeting starts in Washington, DC.
U.S. NFIB small business optimism was 91.8 last month. We get a fresh reading.
On Wednesday, the IMF meeting is ongoing.
We get the latest MBA mortgage applications for the USA, for the week of Oct. 7th. These have been down -14.2%.
The U.S. PPI comes out for SEPT. The AUG reading was +7.3% y/y, ex food and energy.
The U.S. WASDE report comes out. A key report for Agricultural Commodities.
The FOMC minutes come out.
On Thursday, the IMF meeting is ongoing.
The U.S. CPI for SEPT comes out. I see a +6.3% y/y ex-food and energy print is the prior reading.
On Friday, the IMF meeting ends.
Mainland China’s CPI for SEPT comes out. The prior is +2.5% y/y. Not sure I would trust that data. But a low value here may reflect COVID shutdowns.
The U of Michigan consumer sentiment data comes out. It has remained low at 58.6 in the prior reading. This has U.S. midterm election implications.
Conclusion
On Friday, October 14th, the official Q3 S&P500 earnings season gets underway.
Major banks JPMorgan (JPM - Free Report) , Citigroup (C - Free Report) , Morgan Stanley (MS - Free Report) , U.S. Bancorp (USB - Free Report) and PNC (PNC - Free Report) report their results Before the Market Opens (BMO).
On Oct. 5th, Zacks Research Director Sheraz Mian wrote this on Q3 earnings season:
“We are off to a rough start for the early 2022 Q3 results that have been coming out.”
“All of these early reports have been from companies reporting results for their fiscal quarters ending in August, which we count as part of our September-quarter tally.”
“We have seen such Q3 results from 17 S&P 500 members already.”
“Our comment about the ‘rough start’ that these results show isn’t just about the disappointing results from the likes of FedEx (FDX - Free Report) , Nike (NKE - Free Report) , Carnival (CCL - Free Report) and others, but how so few of these companies have been able to beat estimates that had already come down.”
“The proportion of these 17 S&P 500 index members beating EPS and revenue estimates is the lowest in the last 5 years.”
Here are Sheraz Mian’s five points:
(1) Estimates for the last two quarters of 2022 and full-year 2023 are coming down, even though positive revisions to Energy continue to partly offset cuts elsewhere.
(2) The +0.7% earnings growth expected for the S&P 500 index in 2022 Q3 is down from +7.2% at the start of the period.
Excluding the Energy sector, Q3 earnings are expected to be down -6.0% at present, a significant decline from +2.1% at the beginning of July.
(3) Q3 estimates were cut for 14 of 16 Zacks sectors, once reporting got underway.
Biggest sector declines come from Consumer Discretionary, Consumer Staples, Tech, Retail and Conglomerates.
(4) For a calendar-year picture, total S&P500 earnings should be up +7.0% in 2022 and +6.1% in 2023.
Ex-Energy, total 2022 index earnings would be up +0.4% (versus +7.0% with Energy).
(5) Annual 2023 earnings estimates have been coming down after peaking in mid-April.
The 2023 earnings data is down -4% from a peak for the S&P500 index as a whole, and -6.6% ex-Energy.
That’s it for me.
Warm Regards,
John Blank
Zacks Chief Equity Strategist and Economist