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A Year of Russia's War on Ukraine: Global Week Ahead
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This Global Week Ahead marks a year since Russia invaded Ukraine.
The war goes on.
But the world, and the markets, are in a very different place from last February.
Here are Reuters’ five world market themes, reordered for equity traders:
(1) Tail End of Q4 Earnings Season
Fourth-quarter earnings season is nearly over and it has been tepid so far.
The days ahead will bring a look at how the U.S. consumer has held up as some heavy-hitter retailers report results.
Walmart, the world's largest retailer by sales, and home improvement giant Home Depot reported Tuesday, while discount store operator TJX Companies reports on Wednesday.
Lowe's and Best Buy will deliver results the following week.
Beyond the retail sector, semiconductor maker Nvidia and pharma company Moderna also announce earnings.
Fourth-quarter earnings are expected to have dropped -2.8% from the year-ago period, Refinitiv IBES data as of Feb 10th shows.
(2) Inflation Indicators from Europe
European stocks have risen in line with a recovery in business sentiment and activity that signals the region may escape recession. But markets are treading a fine line.
Any upswing in the new orders component of the upcoming purchasing managers indexes — the keenly watched surveys of business activity — could be bullish.
But if rosier commercial conditions bring with them rising price pressures, this may strengthen the European Central Bank's resolve to keep raising interest rates given stubbornly high inflation.
Yields on Germany's two-year bonds, which reflect interest-rate expectations, have hit their highest since 2008 this month.
At the same time, equities are plugged into a view that higher borrowing costs will not derail companies' earnings prospects. These outlooks are not coherent. It will be difficult for both asset classes to be right.
(3) India Hosts First G20 Finance and Central Bank Summit of 2023
Difficult international discussions over debt forgiveness for poor nations are going to get even trickier, when India hosts from Feb. 22-25 the first G20 finance and central bank chiefs meeting for the year.
The world's largest bilateral creditor China is under fire for playing tough on its terms.
At the top of the agenda, besides cryptocurrency regulation, is the G20 Common Framework debt pact to allow the restructuring of low-income countries' debts after the pandemic.
India supports a push by the IMF, the World Bank and the United States for the Common Framework to include middle-income countries, though China has resisted.
Progress is slow and while Chad, Ethiopia, Ghana and Zambia have all sought help, so far only Chad has reached a deal.
(4) When Does the New Bank of Japan (BoJ) Chief Show Up for Work?
Although incoming Bank of Japan governor Kazuo Ueda is a dove, investors expect his tenure to end to yield curve controls.
The $8-trillion question for the JGB market, though, is when?
On the same day as the Ukraine anniversary — Feb. 24 — Ueda should offer clues on timing when he testifies with his two would-be deputies to the lower house. His Upper house testimony will be on the following Monday.
The consensus is Ueda will not rush to make changes, but with the costs of maintaining YCC climbing, and market distortions ever more pronounced, time is against him.
Elsewhere, the Reserve Bank of New Zealand sets policy on Wednesday and the Bank of Korea on Thursday.
Both are seen taking dovish turns, with consumer prices starting to cool, and South Korea at risk of its first recession since the 2020 onset of the pandemic.
(5) Munich Security Conference Discusses Year of War on Ukraine
Senior politicians and military leaders from around the globe met in Germany last weekend, days before the anniversary on Feb. 24th of Russia's invasion of Ukraine, Europe's biggest conflict since World War Two.
The war is estimated to have cost thousands of lives and displaced millions. Sweeping sanctions have severed Russia from the fabric of global financial markets, reshaped commodity and energy flows, and pushed up inflation and funding pressures globally.
Moscow is ramping up its spring offensive, while Ukraine — armed with heavier and longer-range firepower from the West — gathers strength for a counter push.
To debate the West's further response, German Chancellor Olaf Scholz, French President Emmanuel Macron and U.S. Vice President Kamala Harris were among many top officials attending the Munich Security Conference.
Top Zacks #1 Rank (STRONG BUY) Stocks
I found top large-cap stocks from three different global regions this week.
(1) Bouygues (BOUYF - Free Report) : This is a $31 a share French Industrial Services company, with a market cap of $58.7B. I see a Zacks Value score of C, a Zacks Growth score of F and a Zacks Momentum score of B.
(2) MercadoLibre (MELI - Free Report) : This is a $1,120 (you read that right!) a share Internet Commerce company in Latin America, with a market cap of $56.3B. I see a Zacks Value score of F, a Zacks Growth score of A and a Zacks Momentum score of D.
(3) Cadence Design Systems (CDNS - Free Report) : This is a $194 a share U.S.-based Computer-Software chip-related company, with a market cap of $53.1B. I see a Zacks Value score of F, a Zacks Growth score of B and a Zacks Momentum score of A.
Stocks with Zacks Growth scores of A or B interest me.
Key Global Macro
Focus on the U.S. core PCE reading out on Friday.
That is the FOMC’s preferred measure of U.S. core consumer price inflation.
On Monday, it was Presidents Day holiday in the USA.
There was a PBoC rate decision. The one-year loan prime rate was kept at 3.65%.
On Tuesday, Japan’s Jibun Bank manufacturing PMI fell to 47.4 in February, down from an anticipated 48.9. The prior read was also 48.9, unrevised.
The S&P Global Manufacturing PMI for February came in higher than expected, to 47.8. This was expected to reach between 46.8 and 47.1. The prior month was also 46.8.
On Wednesday, there is non-monetary policy ECB meeting.
There is a RBNZ rate statement and presser.
FOMC minutes come out.
On Thursday, the Euro Area core harmonized index of consumer prices for JAN should be +5.2%. That’s the same as the prior month.
U.S Q4 GDP in a second look should be +2.9% y/y. The same as the ‘advance’ reading.
On Friday, the critical core Personal Consumption Expenditure (PCE) data for JAN arrives. I see a +4.1% y/y rate. The prior was +4.4% y/y.
If the U.S. core PCE rate of inflation is indeed down by -0.3% in JAN, it will be welcome news for bullish stock traders.
Conclusion
Last in line?
Zacks Research Director Sheraz Mian’s latest on Q4 earnings:
This Week’s Reporting Docket
We have more than 600 companies on deck to report results this week, including 60 S&P500 members.
Notable companies reporting this week, aside from the aforementioned retailers include Nvidia, Alibaba, eBay, Home Depot and others.
2022 Q4 Earnings Season Scorecard
As of Friday, February 17th, we had Q4 results from 407 S&P 500 members or 81.4% of the index’s total membership.
Total earnings for these companies are down -5.5% from the same period last year on +5.9% higher revenues.
70.3% are beating EPS estimates and 71.3% are beating revenue estimates.
Have a great trading week!
John Blank Zacks Chief Equity Strategist and Economist
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A Year of Russia's War on Ukraine: Global Week Ahead
This Global Week Ahead marks a year since Russia invaded Ukraine.
The war goes on.
But the world, and the markets, are in a very different place from last February.
Here are Reuters’ five world market themes, reordered for equity traders:
(1) Tail End of Q4 Earnings Season
Fourth-quarter earnings season is nearly over and it has been tepid so far.
The days ahead will bring a look at how the U.S. consumer has held up as some heavy-hitter retailers report results.
Walmart, the world's largest retailer by sales, and home improvement giant Home Depot reported Tuesday, while discount store operator TJX Companies reports on Wednesday.
Lowe's and Best Buy will deliver results the following week.
Beyond the retail sector, semiconductor maker Nvidia and pharma company Moderna also announce earnings.
Fourth-quarter earnings are expected to have dropped -2.8% from the year-ago period, Refinitiv IBES data as of Feb 10th shows.
(2) Inflation Indicators from Europe
European stocks have risen in line with a recovery in business sentiment and activity that signals the region may escape recession. But markets are treading a fine line.
Any upswing in the new orders component of the upcoming purchasing managers indexes — the keenly watched surveys of business activity — could be bullish.
But if rosier commercial conditions bring with them rising price pressures, this may strengthen the European Central Bank's resolve to keep raising interest rates given stubbornly high inflation.
Yields on Germany's two-year bonds, which reflect interest-rate expectations, have hit their highest since 2008 this month.
At the same time, equities are plugged into a view that higher borrowing costs will not derail companies' earnings prospects. These outlooks are not coherent. It will be difficult for both asset classes to be right.
(3) India Hosts First G20 Finance and Central Bank Summit of 2023
Difficult international discussions over debt forgiveness for poor nations are going to get even trickier, when India hosts from Feb. 22-25 the first G20 finance and central bank chiefs meeting for the year.
The world's largest bilateral creditor China is under fire for playing tough on its terms.
At the top of the agenda, besides cryptocurrency regulation, is the G20 Common Framework debt pact to allow the restructuring of low-income countries' debts after the pandemic.
India supports a push by the IMF, the World Bank and the United States for the Common Framework to include middle-income countries, though China has resisted.
Progress is slow and while Chad, Ethiopia, Ghana and Zambia have all sought help, so far only Chad has reached a deal.
(4) When Does the New Bank of Japan (BoJ) Chief Show Up for Work?
Although incoming Bank of Japan governor Kazuo Ueda is a dove, investors expect his tenure to end to yield curve controls.
The $8-trillion question for the JGB market, though, is when?
On the same day as the Ukraine anniversary — Feb. 24 — Ueda should offer clues on timing when he testifies with his two would-be deputies to the lower house. His Upper house testimony will be on the following Monday.
The consensus is Ueda will not rush to make changes, but with the costs of maintaining YCC climbing, and market distortions ever more pronounced, time is against him.
Elsewhere, the Reserve Bank of New Zealand sets policy on Wednesday and the Bank of Korea on Thursday.
Both are seen taking dovish turns, with consumer prices starting to cool, and South Korea at risk of its first recession since the 2020 onset of the pandemic.
(5) Munich Security Conference Discusses Year of War on Ukraine
Senior politicians and military leaders from around the globe met in Germany last weekend, days before the anniversary on Feb. 24th of Russia's invasion of Ukraine, Europe's biggest conflict since World War Two.
The war is estimated to have cost thousands of lives and displaced millions. Sweeping sanctions have severed Russia from the fabric of global financial markets, reshaped commodity and energy flows, and pushed up inflation and funding pressures globally.
Moscow is ramping up its spring offensive, while Ukraine — armed with heavier and longer-range firepower from the West — gathers strength for a counter push.
To debate the West's further response, German Chancellor Olaf Scholz, French President Emmanuel Macron and U.S. Vice President Kamala Harris were among many top officials attending the Munich Security Conference.
Top Zacks #1 Rank (STRONG BUY) Stocks
I found top large-cap stocks from three different global regions this week.
(1) Bouygues (BOUYF - Free Report) : This is a $31 a share French Industrial Services company, with a market cap of $58.7B. I see a Zacks Value score of C, a Zacks Growth score of F and a Zacks Momentum score of B.
(2) MercadoLibre (MELI - Free Report) : This is a $1,120 (you read that right!) a share Internet Commerce company in Latin America, with a market cap of $56.3B. I see a Zacks Value score of F, a Zacks Growth score of A and a Zacks Momentum score of D.
(3) Cadence Design Systems (CDNS - Free Report) : This is a $194 a share U.S.-based Computer-Software chip-related company, with a market cap of $53.1B. I see a Zacks Value score of F, a Zacks Growth score of B and a Zacks Momentum score of A.
Stocks with Zacks Growth scores of A or B interest me.
Key Global Macro
Focus on the U.S. core PCE reading out on Friday.
That is the FOMC’s preferred measure of U.S. core consumer price inflation.
On Monday, it was Presidents Day holiday in the USA.
There was a PBoC rate decision. The one-year loan prime rate was kept at 3.65%.
On Tuesday, Japan’s Jibun Bank manufacturing PMI fell to 47.4 in February, down from an anticipated 48.9. The prior read was also 48.9, unrevised.
The S&P Global Manufacturing PMI for February came in higher than expected, to 47.8. This was expected to reach between 46.8 and 47.1. The prior month was also 46.8.
On Wednesday, there is non-monetary policy ECB meeting.
There is a RBNZ rate statement and presser.
FOMC minutes come out.
On Thursday, the Euro Area core harmonized index of consumer prices for JAN should be +5.2%. That’s the same as the prior month.
U.S Q4 GDP in a second look should be +2.9% y/y. The same as the ‘advance’ reading.
On Friday, the critical core Personal Consumption Expenditure (PCE) data for JAN arrives. I see a +4.1% y/y rate. The prior was +4.4% y/y.
If the U.S. core PCE rate of inflation is indeed down by -0.3% in JAN, it will be welcome news for bullish stock traders.
Conclusion
Last in line?
Zacks Research Director Sheraz Mian’s latest on Q4 earnings:
This Week’s Reporting Docket
We have more than 600 companies on deck to report results this week, including 60 S&P500 members.
Notable companies reporting this week, aside from the aforementioned retailers include Nvidia, Alibaba, eBay, Home Depot and others.
2022 Q4 Earnings Season Scorecard
As of Friday, February 17th, we had Q4 results from 407 S&P 500 members or 81.4% of the index’s total membership.
Total earnings for these companies are down -5.5% from the same period last year on +5.9% higher revenues.
70.3% are beating EPS estimates and 71.3% are beating revenue estimates.
Have a great trading week!
John Blank
Zacks Chief Equity Strategist and Economist