In the Global Week Ahead, the July 4th Independence Day holiday in the U.S. may bring a quiet start to the trading week for world markets.

But don't bet on it.

In Asia, Mainland China and Japan are worried about currency weakness, meaning investors are alert for signs of action from central government authorities.

Australia's central bank meets.

Finally, the most closely-watched U.S. macro indicator is out on Friday at 8:30 am ET: Non-farm payroll job additions are always important to traders.

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

(1) Friday delivers the June Federal Nonfarm Jobs Report

Investors betting on resiliency of the U.S. economy have found solace in the solid labor market. But its strength will be tested by the July 7th monthly jobs report.

Economists polled by Reuters expect +200,000 new jobs were created in June, a slowdown from recent monthly growth.

In May, non-farm payrolls increased +339,000, well above estimates, although a surge in the unemployment rate to a seven-month high of 3.7% suggested that labor market conditions were easing.

The jobs report comes after the Federal Reserve skipped raising rates in June after lifting them at 10 straight meetings.

Investors expect the Fed to resume hiking in July. Of course, if the labor market is weakening more than expected, such a move could be thrown into doubt.

After all, Fed Chair Jerome Powell says interest rates will move at a "careful pace" from here.

(2) What Can Q2 Earnings Reports Show Traders About Consumer Inflation?

Inflation has eased from multi-year peaks.

But for anyone that has visited a supermarket, put fuel in their car, or even paid for concert tickets across big economies, the cost of living remains high.

IMF researchers calculate that in the first quarter, corporate profits accounted for 45% of the annual rise in Eurozone inflation, by far the largest contributing factor, and that ratio is similar elsewhere.

It says companies need to relinquish some of their juicy profits if inflation is to get back to target.

No doubt central banks have had some success in quelling inflation with rate rises. Trade flows meanwhile have normalized since Russia's invasion of Ukraine, while the cost of the likes of wheat, sunflower oil or oil have eased.

Still with the inflation fight far from over, expect companies to now face greater scrutiny from policymakers and consumers alike.

(3) Vladmir Putin and the Mutiny, Continued

The Wagner mutiny, the gravest threat to Russia's Vladimir Putin's rule to date, might have been aborted, but will long reverberate.

Any changes to Russia's standing — or to the momentum behind the war in Ukraine — will have been felt near and far.

The immediate fallout would be felt in commodity markets from crude oil to grains —  most sensitive to domestic changes in Russia.

But knock-on effects, from inflation pressures to risk aversion in case of a major escalation, could have far reaching consequences for countries and corporates already feeling the heat from rising rates.

The domestic fallout from the uprising is also still in flux.

Two of Russia's most senior generals having dropped out of public view while the rouble crashed through the 87 to the dollar level to a 15-month low on political risk concerns.

(4) Monday has the Small Business Caixin Manufacturing PMI for Mainland China

Chinese data looks set to deepen speculation that Beijing stands ready to stimulate a flagging economy and prop up a weakening currency.

Monday's Caixin purchasing managers index for the manufacturing sector may show business conditions deteriorating, Societe Generale analysts say, citing "high-frequency data.”

Weak consumer confidence and a lackluster property market have helped push Chinese equities (CSI300) down about -5% in the last quarter. The yuan has lost around -4.6% against the dollar so far this year.

By setting a stronger-than-expected trading band for its currency on June 27th, China may have hinted that economic policy is shifting into stimulus mode.

To keep 2023 GDP growth above +5%, authorities are likely to continue cutting rates, step up support for home buyers and increase investment in high-tech manufacturing.

And if growth deteriorates further, a "more aggressive" response is likely, analysts say.

(5) On Tuesday, the Reserve Bank of Australia (RBA) Meets

The investors wearing neck braces must be Australian.

The Reserve Bank of Australia and economic data have conspired to give markets repeated cases of whiplash ahead of Tuesday's highly anticipated policy decision.

Resilient retail sales data on Thursday suggested some cushion for another rate rise, a day after a shock slide in consumer inflation to a 13-year low saw an aggressive paring of tightening bets.

Prior to that, a blockbuster jobs report mid-month had seen hike bets rise, after getting wound down following surprisingly dovish minutes of the June meeting, showing the decision to raise rates was "finely balanced.”

The upshot? Market odds are just 1-in-3 for a third consecutive quarter point bump on July 4, and an Aussie dollar languishing at multi-week lows. Considering the May hike was also a line-ball call, neck stretches seem advisable.

Zacks #1 Rank (STRONG BUY) Stocks

Two major global Into Tech stocks, and one major global Building Materials stock, made it onto our Zacks #1 list this week.

(1) Royal Caribbean Cruises ((RCL Quick QuoteRCL - Free Report) ): This Leisure and Recreation company’s stock prices at $101, with for a current market cap of $26B.

I see a Zacks Value score of D, a Zacks Growth score of A and a Zacks Momentum score of A.

 

Image Source: Zacks Investment Research

Based in Miami and incorporated in 1985, Royal Caribbean Cruises is a cruise company.

It owns and operates three global brands — Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises. Additionally, it has 50% investment in a joint venture with TUI AG, which operates the brand TUI Cruises.

The company’s cruise brands primarily serve the contemporary, premium and deluxe segments of the cruise vacation industry, which also includes the budget and luxury segments.

These brands operate 64 ships. The ships operate on a selection of diverse itineraries worldwide that include roughly 1,000 destinations on all seven continents.

The company reports revenues under the following segments — Passenger ticket revenues (65.5% of total revenues in 2022) and Onboard and other revenues (34.5%).

Across the company’s five brands, nearly 5.5 million guests sailed in 2022. By the end of 2022, 64 out of 75 ships returned to operations, representing more than 85% of its worldwide capacity.

The company’s bookings improved sequentially by 2022-end. As of Dec 31, 2022, the company had nearly $4.2 billion in customer deposits.

(2) Yum China (YUMC): This is a $56 stock, in the Mainland China Retail-Restaurant industry.

This company’s stock currently has a market cap of $23.5B.

I see a Zacks Value score of D, a Zacks Growth score of A and a Zacks Momentum score of D.

 

Image Source: Zacks Investment Research

Yum China Holdings, incorporated in Delaware on Apr 1, 2016, became an independent and publicly-traded company; post its spin-off from Yum! Brands, Inc. on Oct 31, 2016.

Yum China’s U.S. operations are based in Texas. The company operates both company-owned and franchised restaurants.

Yum China pays a license fee to Yum! Brands, which equals 3% of net system sales from both company-owned and franchise restaurants.

The company’s brands include: KFC, Pizza Hut and Taco Bell. The company also owns: East Dawning, Little Sheep, and COFFii & JOY.

Being the largest restaurant company in China, Yum China had 13,180 restaurants, covering more than 1,700 cities, as of Mar 31. Yum China’s reportable segments are KFC (75.4% of the total revenues in 2022) and Pizza Hut (20.5%).

KFC is the leading quick-service restaurant brand in China. The brand opened its first restaurant in Beijing in 1987. As of Mar 31, there were 9,239 KFC restaurants in 1,200 cities across China.

In addition to Original Recipe chicken, KFC in China has an extensive menu featuring pork, seafood, rice dishes, fresh vegetables, soups, congee, desserts and many other products, including premium coffee. The KFC brand is also seeking to increase revenues from its restaurants throughout the day, with breakfast, delivery and 24-hour operations in many of its locations.

Pizza Hut is the leading casual dining restaurant brand in China. The brand operates in more than 500 cities, offering multiple dayparts — including breakfast, lunch and afternoon tea.

Pizza Hut opened its first China location in Beijing in 1990. The brand has grown rapidly. As of Mar 31, 2023, there were more than 2,983 Pizza Hut restaurants across China. It has an extensive menu, offering various pizzas, entrees, pasta, rice dishes, appetizers, beverages and desserts.

(3) VeriSign (VRSN): This is a $223 stock found in the Internet – Software and Services industry.

This company’s stock has a market cap of $23.2B.

I see a Zacks Value score of F, a Zacks Growth score of A, and a Zacks Momentum score of F.

 

Image Source: Zacks Investment Research

Based in Reston, VA, VeriSign Inc. provides Internet infrastructure services that include domain name registry services and infrastructure assurance services. Its only reportable segment includes Registry Services.

VeriSign reported revenues of $1.42 billion in 2022.

Registry services operate the .com, .net, .cc, .tv, .gov, .jobs, .edu and .name domain name directories. With respect to the .com, .net and .name domains, the company has agreements with The Internet Corporation for Assigned Names and Numbers (ICANN) that makes it the exclusive registrar of these domain names. The company has an agreement with the U.S. Department of Commerce with respect to the .com domain.

Other agreements make it the exclusive registry for the .tv and .cc country code top-level domains (ccTLDs) and the provider of back-end systems for all .gov, .jobs and .edu domain names. It also provides internationalized domain name (IDN) services for websites in local languages.Verisign’s gTLDs and ccTLDs can support standards-compliant registrations in more than 100 different native languages and scripts.

The company’s operations infrastructure consists of three secure data centers in Dulles, VA; New Castle, DE; and Fribourg, Switzerland as well as more than 160 resolution sites around the world.

Domain names can be registered for between one and 10 years. The .com and .net fees are charged as per agreement terms with ICANN and based on prior approval. The .name fees are charged as per terms of agreement with ICANN, while the .gov registry fees are based on the terms of agreement with the U.S. General Services Administration (GSA).

On Dec 5, 2018, Verisign completed the sale of its rights, economic benefits and obligations in all customer contracts related to the Security Services business, which primarily consisted of Distributed Denial of Service (DDoS) Protection Services and Managed Domain Name System (DNS) Services, to NeuStar, Inc.

Key Global Macro

Monday is a big day for manufacturing PMIs, around the world.

Friday has the U.S. nonfarm payroll report.

Both sets of macro indictors are important.

On Monday, the Jibun Bank Japan manufacturing PMI for June is out: 49.8 was in-line with last month's initial print, which has since been revised up to a final 50.6 for May.

The Caixin Mainland China manufacturing PMI for June came down 40 basis points (bps) to 50.5 from 50.9 in May. Conditions improved for the wecond month in a row, albeit at a slow pace.

The Euro Area HCOB manufacturing PMI for June comes out at 43.4, a tad below the consensus 43.6. The original May reading was 43.6, but has been upwardly revised to 44.8.

The US S&P Global manufacturing PMI comes out for June. I see a prior at 46.3.

The ISM manufacturing PMI also comes out for June. The consensus shows 47.2. The prior reading was 46.9. An improvement!

It is Canada Day.

On Tuesday, traders get an RBA policy rate statement.

US markets are closed for Independence Day celebrations.

On Wednesday, the latest FOMC minutes come out.

On Thursday, ADP private job adds for June in the USA should be +180K, after +278K in May.

We get JOLTS job openings for May in the USA. The prior was a high 10.1 million openings.

On Friday, June nonfarm Federal payroll adds should be +200K. May showed up +339K. The May numbers will be revised too.

The U.S. household unemployment rate is expected to stay at 3.7% in June.

Conclusion

To end, read up about two important Zacks Q2-23 S&P500 big tech earnings narratives.

Here is more from Zacks Research Director Sheraz Mian:

“The Q2 earnings season will really get going with the July 14th quarterly release from JPMorgan (JPM) and the other big banks.”

“Earnings estimates in the aggregate for the S&P500 index have come down only a touch since the start of April, with several sectors starting to see positive estimate revisions.

“These sectors include:

• Construction
• Industrial Products
• Autos
• Tech
• Medical
• Retail

“The favorable shift in the Tech sector’s earnings outlook is particularly significant since the sector brings in almost 26% of all S&P500 earnings.

“Some of the major Tech stocks that are at the forefront of the market’s gains this year are also experiencing positive estimate revisions.

“Take, for example, Meta Platforms (META) and Nvidia Corp. (NVDA).

“Meta is currently expected to bring in $11.94 per share on $127.08 billion in revenues this year. The $11.94 per share in earnings estimate is up from $10.22 on March 31st and $8.06 on January 31st.

“A big part of Meta’s improving earnings outlook has resulted from more effective cost controls. But that’s hardly the only reason for rising earnings estimates, as revenue estimates have also been steadily increasing.

“The Nvidia example is relatively more straightforward, given the company’s blockbuster quarterly results on May 24th and record guidance upgrade. Nvidia is currently expected to bring in $7.66 per share in earnings this year (fiscal year ends in January) on $42.6 billion in revenues.

“Nvidia’s $7.66 EPS estimate is up from $4.48 on March 31st.

“We are not suggesting that the improving earnings outlook for Meta and Nvidia are representative of the entire Tech sector. But they nevertheless prove the point that the profitability picture for parts of the sector has turned around in recent weeks.”

Good luck on your trading and investing.

Happy Independence Day!

John Blank