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Earnings from U.S. Big Tech companies. Tesla (TSLA - Free Report) kicks off After the Market Closes (AMC) on Wednesday. Big Tech stock market values exceed that of some nations' entire economies!
A pulse-check on Mainland China’s Q2 real GDP growth.
A meeting of global finance ministers. G20 players gather in India to discuss loans to developing countries, among other things.
The three events are in the stock market’s spotlight.
All of this takes place against a backdrop of an epic U.S. dollar sell-off, as the U.S. economy cools, and markets bet the Fed is nearly done raising rates.
Next are Reuters’ five world market themes, reordered for equity traders—
(1) Tech Mega-cap Q2 Earnings Come Out
Second-quarter earnings season kicks into gear next week, with Tesla the first of the mega-caps to report results.
The Elon Musk-led electric vehicle maker posts results AMC on Wednesday.
Tesla is one of seven huge stocks whose outsized gains in 2023 have boosted the wider U.S. stock market.
There are signs the rally is broadening to other sectors, but if Tesla or any other mega-caps disappoint this quarter, the hit to equity indexes could be severe.
On Monday, Mainland China kickstarts the week with the release of Q2 GDP data.
Last year's low base-effect, when COVID lockdowns hit largest swathes of the economy, will likely offer a glow to the latest figures, but the devil is in the details.
Months of disappointing higher-frequency data makes a repeat of the first-quarter's above-consensus growth improbable, and has some investors questioning whether the government's 5% full-year target is realistic.
Mounting deflationary pressure and a slump in trade are the latest red flags on the health of China, which as recently as six months ago had investors betting on a robust recovery.
Patience is wearing thin, as markets wait for Beijing to unveil a highly anticipated stimulus package, with hopes this month's Politburo meeting could help turn sentiment around.
(3) G20 Finance Minister Summit in India
How to funnel more sustainable financing to developing economies and get multilateral lenders to increase loans tops the agenda for Group of 20 finance chiefs meeting in the Indian city of Gandhinagar on July 17-18.
Some of the world's poorest nations have seen their borrowing costs and debt burdens soar as global interest rates were ramped up. Efforts to restructure for those that tipped into default have been painfully slow.
Regulation of cryptocurrencies, as well as talks on a multilateral agreement on taxing conglomerates with cross-border operations will be held at the gathering that will set the tone for a leaders' summit in New Delhi in September.
U.S. Treasury Secretary Janet Yellen, the World Bank's new President Ajay Banga and International Monetary Fund chief Kristalina Georgieva are among those attending, as are senior treasury officials from Russia and China, according to Indian officials.
(4) U.K. Consumer Price Inflation Data Comes Out
U.K. inflation may be moderating, although the economy remains vulnerable, as high living costs collide with high debt burdens.
Analysts expect Wednesday's June inflation report to show price increases slowed from the 8.7% annual rate in May.
That may not dissuade the Bank of England from cranking rates higher, given the sizzling pace of wage growth.
Rate rises are snaking slowly through the economy, as over 85% of homeowners are on fixed-rate mortgages and many of them are still protected by cheap rates agreed in prior years.
But about a million households will see their payments jump by at least 500 pounds ($651.80) a month for their home loans by 2026, the BoE estimates.
And data on house prices and new car registrations will show how confident consumers are about their finances.
(5) U.N.-Brokered Grain Deal in Black Sea Expires
A U.N.-brokered deal that guarantees the safe passage of Black Sea grain from Ukraine ports expires on Monday.
Under the year-old agreement, over 32 million tons of corn, wheat and other grains have been exported and the price of many of these staples has dropped sharply, helping to cool inflation.
But Russia says it sees no grounds to prolong the pact and says commitments to remove hurdles to Russian food and fertilizer exports have not been fulfilled.
No new ships have been registered to travel to Ukraine since June 26 and the clock is ticking.
Ukraine is shipping roughly half the corn and wheat it did before the war. Others such as Brazil, have stepped up supplies.
But a global food crisis is far from over. In 2022, a record number experienced acute hunger, according to the U.N., and global stocks of wheat and corn are running at multi-year lows.
The proportion of people hungry in Africa and Oceania likely increased last year to 19.7% and 7%, respectively, contributing to rising global hunger since before the pandemic, according to the Food and Agriculture Organization.
Zacks #1 Rank (STRONG BUY) Stocks
Let’s focus on large market cap Japanese stocks this week.
Shares look cheap!
(1) Panasonic : This Audio-Video (and Electric Battery) industry stalwart’s stock price is at $12. There is a current market cap of $29.3B.
I see a Zacks Value score of A, a Zacks Growth score of A and a Zacks Momentum score of A.
Image Source: Zacks Investment Research
Panasonic Corp. is a worldwide leader in the development and manufacture of electronic products for a wide range of consumer, business, and industrial needs.
The company's shares are listed on the Tokyo, Osaka, Nagoya and New York stock exchanges.
(2) Nissan Motor (NSANY - Free Report) : This is a $8 stock, in the Foreign Auto industry.
This company’s stock currently has a market cap of $16.1B.
I see a Zacks Value score of A, a Zacks Growth score of B and a Zacks Momentum score of A.
Image Source: Zacks Investment Research
Nissan Motor Company, Ltd. manufactures and markets motor vehicles and parts.
In North America, Nissan's operations include styling, engineering, manufacturing, sales, customer and corporate finance and industrial and textile equipment.
Nissan in North America employs more than 20,000 people in the United States, Canada and Mexico and generates nearly 75,000 jobs through its 1,500 Nissan and Infinity dealerships across the continent.
(3) Komatsu (KMTUY - Free Report) : This is a $27 stock found in the Manufacturing, Mining, & Construction industry. There is a market cap of $26.0B.
I see a Zacks Value score of C, a Zacks Growth score of D and a Zacks Momentum score of B.
Image Source: Zacks Investment Research
Komatsu is a major manufacturer of construction, mining and utility equipment and industrial machinery with operations all over the world.
Approximately 91% of the company's revenue comes from the manufacture and sale of construction, mining and utility equipment, with about 6% of the total comes from industrial machinery and the rest from retail financing.
Geographically, approximately 23% of Komatsu's 2021 revenues came from the North American region, with the rest coming from Latin America (15% of the total), Japan (12%), Asia (12%), Oceania (10%), Europe (9%), China (4%) and others.
Komatsu's global headquarters is located in Tokyo, Japan.
Key Global Macro
Mainland China is in focus. That country offers both a Q2 GDP print, and a PBoC monetary policy decision.
On Monday, Mainland China’s q/q real GDP growth in Q2 was below expectations to +0.8%. The prior reading was an unrevised +2.2%.
In y/y terms, +6.3% is higher than the prior real GDP growth reading, which was +4.5% but below the +7.3% consensus estimate.
Mainland China’s retail sales for June are out, too. These are also below expectations to a relatively platry +3.1% following a +12.7% y/y prior growth print. This is the weakest level since the -1.8% we saw in December 2022.
On Tuesday, U.S. retail sales (ex-auto) should be up +0.3% m/m in June. The broader m/m reading should be up +0.5% m/m.
U.S. capacity utilization for June should be at a solid 79.5%. That is solid.
On Wednesday, the Euro Area’s core HICP consumer inflation rate for June should be stable at +5.4% y/y.
U.S. Housing Starts should be 1.45M in June, after a 1.63M print in May. A noted slide.
On Thursday, a People’s Bank of China (PBoC) policy interest rate decision lands. The policy rate there is at 3.55%.
On Friday, U.K. retail sales (ex-auto) for June come out. The prior print was up +0.1% m/m. The broader prior print was +0.3% m/m.
Conclusion
What Zacks Research Director Sheraz Mian wrote about Q2 earnings (July 12th):
(1) Q2-23 earnings for the S&P500 index are expected to decline -9.8% from the same period last year on -0.4% lower revenues.
Profit margin declines for the 6th consecutive quarter drive the earnings drop.
(2) Earnings estimates for Q2-23 came down as the quarter got underway, though the magnitude of cuts to estimates was notably below what we saw in other recent comparable periods.
The -9.8% earnings drop in Q2-23 today is down from -7.2% at the start of the period.
(3) A Q2-23 earnings decline follows a -3.4% decline in Q1-23 and -5.4% drop in Q4-22.
Q3-23 earnings should be the last period of declines, with growth resuming from Q4-23 onwards.
In other words, expect Q2-23 to be the 3rd consecutive quarter of declining S&P500 earnings.
After this, S&P500 EPS growth turns positive in Q4-23 and continues in 2024.
(4) For the 2023 calendar-year, Sheraz expects total S&P500 earnings to decline -3.9% on +0.5% higher revenues.
Exclude Finance: Full-year 2023 earnings go down -6.5%.
Exclude Energy: Full-year S&P500 earnings go down only -0.9%.
That’s it for me.
Warm Regards,
John Blank Zacks Chief Equity Strategist and Economist
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Tesla Reports Wednesday: Global Week Ahead
In the Global Week Ahead, we have:
The three events are in the stock market’s spotlight.
All of this takes place against a backdrop of an epic U.S. dollar sell-off, as the U.S. economy cools, and markets bet the Fed is nearly done raising rates.
Next are Reuters’ five world market themes, reordered for equity traders—
(1) Tech Mega-cap Q2 Earnings Come Out
Second-quarter earnings season kicks into gear next week, with Tesla the first of the mega-caps to report results.
The Elon Musk-led electric vehicle maker posts results AMC on Wednesday.
Tesla is one of seven huge stocks whose outsized gains in 2023 have boosted the wider U.S. stock market.
There are signs the rally is broadening to other sectors, but if Tesla or any other mega-caps disappoint this quarter, the hit to equity indexes could be severe.
Other mega-cap firms, such as Apple (AAPL - Free Report) and Amazon (AMZN - Free Report) , report in the coming weeks.
A slew of other big companies also post results:
(2) Mainland China’s Q2 GDP Lower than Expected
On Monday, Mainland China kickstarts the week with the release of Q2 GDP data.
Last year's low base-effect, when COVID lockdowns hit largest swathes of the economy, will likely offer a glow to the latest figures, but the devil is in the details.
Months of disappointing higher-frequency data makes a repeat of the first-quarter's above-consensus growth improbable, and has some investors questioning whether the government's 5% full-year target is realistic.
Mounting deflationary pressure and a slump in trade are the latest red flags on the health of China, which as recently as six months ago had investors betting on a robust recovery.
Patience is wearing thin, as markets wait for Beijing to unveil a highly anticipated stimulus package, with hopes this month's Politburo meeting could help turn sentiment around.
(3) G20 Finance Minister Summit in India
How to funnel more sustainable financing to developing economies and get multilateral lenders to increase loans tops the agenda for Group of 20 finance chiefs meeting in the Indian city of Gandhinagar on July 17-18.
Some of the world's poorest nations have seen their borrowing costs and debt burdens soar as global interest rates were ramped up. Efforts to restructure for those that tipped into default have been painfully slow.
Regulation of cryptocurrencies, as well as talks on a multilateral agreement on taxing conglomerates with cross-border operations will be held at the gathering that will set the tone for a leaders' summit in New Delhi in September.
U.S. Treasury Secretary Janet Yellen, the World Bank's new President Ajay Banga and International Monetary Fund chief Kristalina Georgieva are among those attending, as are senior treasury officials from Russia and China, according to Indian officials.
(4) U.K. Consumer Price Inflation Data Comes Out
U.K. inflation may be moderating, although the economy remains vulnerable, as high living costs collide with high debt burdens.
Analysts expect Wednesday's June inflation report to show price increases slowed from the 8.7% annual rate in May.
That may not dissuade the Bank of England from cranking rates higher, given the sizzling pace of wage growth.
Rate rises are snaking slowly through the economy, as over 85% of homeowners are on fixed-rate mortgages and many of them are still protected by cheap rates agreed in prior years.
But about a million households will see their payments jump by at least 500 pounds ($651.80) a month for their home loans by 2026, the BoE estimates.
And data on house prices and new car registrations will show how confident consumers are about their finances.
(5) U.N.-Brokered Grain Deal in Black Sea Expires
A U.N.-brokered deal that guarantees the safe passage of Black Sea grain from Ukraine ports expires on Monday.
Under the year-old agreement, over 32 million tons of corn, wheat and other grains have been exported and the price of many of these staples has dropped sharply, helping to cool inflation.
But Russia says it sees no grounds to prolong the pact and says commitments to remove hurdles to Russian food and fertilizer exports have not been fulfilled.
No new ships have been registered to travel to Ukraine since June 26 and the clock is ticking.
Ukraine is shipping roughly half the corn and wheat it did before the war. Others such as Brazil, have stepped up supplies.
But a global food crisis is far from over. In 2022, a record number experienced acute hunger, according to the U.N., and global stocks of wheat and corn are running at multi-year lows.
The proportion of people hungry in Africa and Oceania likely increased last year to 19.7% and 7%, respectively, contributing to rising global hunger since before the pandemic, according to the Food and Agriculture Organization.
Zacks #1 Rank (STRONG BUY) Stocks
Let’s focus on large market cap Japanese stocks this week.
Shares look cheap!
(1) Panasonic : This Audio-Video (and Electric Battery) industry stalwart’s stock price is at $12. There is a current market cap of $29.3B.
I see a Zacks Value score of A, a Zacks Growth score of A and a Zacks Momentum score of A.
Image Source: Zacks Investment Research
Panasonic Corp. is a worldwide leader in the development and manufacture of electronic products for a wide range of consumer, business, and industrial needs.
The company's shares are listed on the Tokyo, Osaka, Nagoya and New York stock exchanges.
(2) Nissan Motor (NSANY - Free Report) : This is a $8 stock, in the Foreign Auto industry.
This company’s stock currently has a market cap of $16.1B.
I see a Zacks Value score of A, a Zacks Growth score of B and a Zacks Momentum score of A.
Image Source: Zacks Investment Research
Nissan Motor Company, Ltd. manufactures and markets motor vehicles and parts.
In North America, Nissan's operations include styling, engineering, manufacturing, sales, customer and corporate finance and industrial and textile equipment.
Nissan in North America employs more than 20,000 people in the United States, Canada and Mexico and generates nearly 75,000 jobs through its 1,500 Nissan and Infinity dealerships across the continent.
(3) Komatsu (KMTUY - Free Report) : This is a $27 stock found in the Manufacturing, Mining, & Construction industry. There is a market cap of $26.0B.
I see a Zacks Value score of C, a Zacks Growth score of D and a Zacks Momentum score of B.
Image Source: Zacks Investment Research
Komatsu is a major manufacturer of construction, mining and utility equipment and industrial machinery with operations all over the world.
Approximately 91% of the company's revenue comes from the manufacture and sale of construction, mining and utility equipment, with about 6% of the total comes from industrial machinery and the rest from retail financing.
Geographically, approximately 23% of Komatsu's 2021 revenues came from the North American region, with the rest coming from Latin America (15% of the total), Japan (12%), Asia (12%), Oceania (10%), Europe (9%), China (4%) and others.
Komatsu's global headquarters is located in Tokyo, Japan.
Key Global Macro
Mainland China is in focus. That country offers both a Q2 GDP print, and a PBoC monetary policy decision.
On Monday, Mainland China’s q/q real GDP growth in Q2 was below expectations to +0.8%. The prior reading was an unrevised +2.2%.
In y/y terms, +6.3% is higher than the prior real GDP growth reading, which was +4.5% but below the +7.3% consensus estimate.
Mainland China’s retail sales for June are out, too. These are also below expectations to a relatively platry +3.1% following a +12.7% y/y prior growth print. This is the weakest level since the -1.8% we saw in December 2022.
On Tuesday, U.S. retail sales (ex-auto) should be up +0.3% m/m in June. The broader m/m reading should be up +0.5% m/m.
U.S. capacity utilization for June should be at a solid 79.5%. That is solid.
On Wednesday, the Euro Area’s core HICP consumer inflation rate for June should be stable at +5.4% y/y.
U.S. Housing Starts should be 1.45M in June, after a 1.63M print in May. A noted slide.
On Thursday, a People’s Bank of China (PBoC) policy interest rate decision lands. The policy rate there is at 3.55%.
On Friday, U.K. retail sales (ex-auto) for June come out. The prior print was up +0.1% m/m. The broader prior print was +0.3% m/m.
Conclusion
What Zacks Research Director Sheraz Mian wrote about Q2 earnings (July 12th):
(1) Q2-23 earnings for the S&P500 index are expected to decline -9.8% from the same period last year on -0.4% lower revenues.
Profit margin declines for the 6th consecutive quarter drive the earnings drop.
(2) Earnings estimates for Q2-23 came down as the quarter got underway, though the magnitude of cuts to estimates was notably below what we saw in other recent comparable periods.
The -9.8% earnings drop in Q2-23 today is down from -7.2% at the start of the period.
(3) A Q2-23 earnings decline follows a -3.4% decline in Q1-23 and -5.4% drop in Q4-22.
After this, S&P500 EPS growth turns positive in Q4-23 and continues in 2024.
(4) For the 2023 calendar-year, Sheraz expects total S&P500 earnings to decline -3.9% on +0.5% higher revenues.
Exclude Finance: Full-year 2023 earnings go down -6.5%.
Exclude Energy: Full-year S&P500 earnings go down only -0.9%.
That’s it for me.
Warm Regards,
John Blank
Zacks Chief Equity Strategist and Economist