In the Global Week Ahead?

• Mainland China's Q3 GDP, trade and FDI figures
• Fresh U.S. retail sales data for SEP, and 
• A rate cut decision by the European Central Bank (ECB) happens, while
• U.K. markets get nervous, ahead of their new government's 1st budget

All of this, as Q3-24 earning seasons get underway, on both sides of the Atlantic.
 

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

(1) On Thursday, U.S. Retail Data Comes Out. Plus, Major U.S. Bank Reports.

Markets get another reading on the health of the U.S. consumer on Thursday, with investors hoping retail sales data will offer further insight into an economy that is turning out to be far more resilient than many had expected.

Stronger-than-expected recent labor market data spurred a recalibration of bets on how deeply the Fed will need to cut rates in coming months, lifting Treasury yields and bolstering the U.S. dollar.

A robust retail sales number could further amplify that trend, offering evidence of strength in an important pocket of the world's largest economy.

With Q3 S&P 500 earnings season under way, results from big banks including Goldman Sachs (GS Quick QuoteGS - Free Report) and Bank of America (BAC Quick QuoteBAC - Free Report) , both reporting on Tuesday, could offer further insight on how consumers are faring.

(2) Major Q3 European Earnings Reports Are Due, Too.

LVMH (LVMUY Quick QuoteLVMUY - Free Report) and ASML (ASML Quick QuoteASML - Free Report) — two of Europe's biggest companies — are due to report results in the coming week, kicking off earnings season on the continent.

While the Eurozone economy struggles to muster any sort of growth, corporate earnings are seen growing for a second straight quarter for the first time since Q1 2023, according to LSEG Data.

That makes for a high bar to hurdle, but as earnings expectations have been lowered coming into reporting season, analysts are still optimistic that Europe Inc. will clear it.

With the STOXX 600 index less than 2% from its all-time high, a more robust earnings picture could bring fresh peaks, as seen in the U.S. in recent days.

(3) Important Mainland China Macro Data Releases.

China's Q3-24 growth figures, due Oct. 18th, are headlining a busy week scattered with data releases from the world's second-largest economy.

Policymakers have said they are "fully confident" of achieving their full-year growth target of around +5.0% — a somewhat bold statement considering Q2's dismal number, and with Q3 unlikely to fare much better.

But investors may look past the pessimism, given Beijing only recently unveiled aggressive stimulus measures in a move that sent mainland stocks scaling fresh highs.

Some of that excitement has since faded, but any further details of fiscal support could drive the next leg of the market rally.

Alongside GDP data, China will release figures on trade, house prices and retail sales, giving policymakers a clue on how much work they have cut out for them before year-end.

(4) On Thursday, Expect the European Central Bank (ECB) to Cut Another 25 bps.

The ECB is set to deliver another quarter-point rate cut on Thursday, a move policymakers were reluctant to flag and traders gave less than a 25% chance to when the bank met a month ago.

But September Eurozone business activity unexpectedly contracting stoked worries the ECB may be cutting rates too slowly as the bloc's economy wobbles.

Inflation has slowed sharply, dropping below the ECB's 2% target in September, shifting the focus for policymakers now onto growth risks.

Economists reckon Thursday's move could kick off back-to-back rate cuts. But rate setters, once burnt twice shy, are unlikely to jump on the bandwagon just yet.

But a more explicit shift may come soon, perhaps in December when the bank releases new forecasts.

Even top hawk Isabel Schnabel has dropped her long-standing warning about the difficulty of taming inflation.

(5) A First U.K. Labour Party Budget Due.

Britain's lenders in international bond markets are getting nervous ahead of the new Labour government's first budget on Oct. 30th. September inflation data, out Wednesday, could make them feel even worse.

Ten-year gilt yields are around their highest since early July after investors sold off in part due to concerns about finance minister Rachel Reeves relaxing borrowing rules to fund public investments. Anxiety about extra debt sales has coincided with uncertainty about whether inflation has been tamed.

The annual rate of UK consumer price increases held steady at 2.2% overall in August, but accelerated to 5.6% in the dominant services sector. Recent data showed rising grocery inflation and retail spending.

Traders widely expect a second Bank of England rate cut in November, but Bank of England Governor Andrew Bailey and Chief Economist Huw Pill have given mixed signals about what happens after that.
 

Zacks #1 Rank (STRONG BUY) Stocks

(1) International Flavors and Fragrances (IFF Quick QuoteIFF - Free Report) : This is a $103 a share stock, with a market cap of $26.1B. It is found in the Consumer Products – Staples industry. I see a Zacks Value score of D, a Zacks Growth score of C and a Zacks Momentum score of C.
 

Image Source: Zacks Investment Research

New York-based International Flavors & Fragrances completed its merger with DuPont’s Nutrition & Biosciences ("N&B") business in 2021, creating a global leader in high-value ingredients and solutions for food and beverage, home and personal care, and health & wellness markets.

The company has introduced new business divisions — Nourish, Scent, Health & Biosciences and Pharma Solutions.

The Nourish segment contributed 55% of the company’s 2023 sales. It comprises three platforms — Ingredients, Flavors and Food Designs. Ingredients provide texturizing solutions to the food industry, food protection solutions used in food and beverage products, specialty soy and pea protein with value-added formulations, emulsifiers and sweeteners. Flavors provide a range of flavor compounds and natural taste solutions, and value-added spices and seasoning ingredients. Food Designs offer savory solution products such as spices, sauces, marinades and mixtures as well as inclusion products.

Health & Biosciences (18% of 2023 sales) includes six platforms: Health, Cultures & Food Enzymes, Home & Personal Care, Animal Nutrition and Grain Processing, with a biotechnology-driven portfolio of products that serve the health and wellness, food, consumer and industrial markets. Products within this portfolio range from enzymes, food cultures, probiotics and specialty ingredients for non-food applications.

Scent (21% of 2023 sales) comprises Fragrance Compounds in two broad categories: Fine Fragrances (including perfumes and colognes) and Consumer Fragrances (including fragrance compounds for personal care, household products and beauty care). The segment also includes Fragrance Ingredients, consisting of synthetic and natural ingredients and Cosmetic Active Ingredients, consisting of active and functional ingredients, botanicals and delivery systems.

Pharma Solutions (8% of 2023 sales) produces cellulosics and alginates-based pharma excipients, and is utilized to improve the functionality and delivery of active pharmaceutic ingredients, including controlled or modified drug release formulations, and enable the development of more effective pharma solutions. The company has entered into an agreement to sell the unit.

(2) NetApp (NTAP Quick QuoteNTAP - Free Report) : This is a $25 a share stock, with a market cap of $26B. It is found in the Computer – Storage Device industry. I see a Zacks Value score of D, a Zacks Growth score of A, and a Zacks Momentum score of F.

Image Source: Zacks Investment Research

NetApp provides enterprise storage as well as data management software and hardware products and services.

The San Jose, CA-based company assists enterprises in managing multiple clouds environments, adopting next-generation technologies like artificial intelligence (AI), Kubernetes, and contemporary databases, and navigating the complexity brought about by the quick development of data and cloud usage.

NetApp reported revenues of $6.27 billion in fiscal 2024.

The company derived 90% of revenues from the Hybrid Cloud segment and the remaining from the Public Cloud Segment.

Hybrid Cloud offers a portfolio of storage management and infrastructure solutions that assist customers to transforming their traditional data centers into modern data centers with the help of cloud.

Under this segment, the company offers intelligent data management software which includes NetApp ONTAP, NetApp Snapshot, NetApp SnapCenter Backup Management, and NetApp Astra, etc.

Customers using NetApp Fabric Attached Storage (FAS) Arrays benefit from a combination of capacity and performance when using either hybrid-flash or disc drive configurations. FAS systems are ideal for secondary storage targets for disaster recovery, backup and tiering.

The Hybrid Cloud also offers storage solution which includes NetApp All-Flash FAS (AFF A-Series), NetApp QLC-Flash FAS (AFF C-Series) and NetApp StorageGRID etc.

Public Cloud offers a portfolio of products delivered primarily as-a-service, along with associated support. This portfolio includes cloud storage and data services and cloud operations services.

The company’s cloud operations services include NetApp Cloud Insights, Spot by NetApp and Instaclustr platform.

Apart from these, NetApp also offers support, consulting and training services.

The company markets and distributes products worldwide through a direct sales force, and an ecosystem of partners, including the leading cloud providers.

On a geographical basis, NetApp generated 51% of revenues in fiscal 2024 from the Americas (the United States, Canada and Latin America), 34% from Europe, Middle East and Africa (EMEA) and the remaining 15% from Asia Pacific (APAC).

NetApp faces stiff competition from companies like HP, Dell, IBM and Oracle.

(3) Ryanair (RYAAY Quick QuoteRYAAY - Free Report) : This is a $43 a share stock, with a market cap of $24.1B. It is found in the Airline Transportation industry. I see a Zacks Value score of B, a Zacks Growth score of D, and a Zacks Momentum score of D.
 

Image Source: Zacks Investment Research

Ryanair Holdings is the parent company of Ryanair Designated Activity Company (formerly known as Ryanair Limited). Ryanair, which commenced its flight operations in 1985, is based in headquartered in Swords, Ireland.

This ultra-low fare carrier offers scheduled-passenger airline service in Ireland, the UK, Continental Europe, Morocco and Israel. Also, it serves short-haul, point-to-point routes. In fact, Ryanair is growing steadily in Germany, Italy and the UK.

Ryanair's new Polish charter airline, Ryanair Sun (now rebranded as Buzz), commenced operations in April 2018. In December 2018, it purchased the remaining 25% of Austrian airline Laudamotion.

In Jun 2019, Ryanair purchased Malta Air — a start-up carrier — in a bid to expand its presence in Malta. Apart from strengthening the carrier’s foothold in Malta, the acquisition has allowed the company to operate flights from Malta to non-EU markets (North Africa).

The company is also making constant efforts to expand its fleet size. The carrier already boasts of a large and efficient fkeet. Ryanair operates a fleet of over 450 Boeing 737-800 and 29 Airbus A320 aircraft. Ryanair aims to take delivery of more than 200 B737 "Gamechanger" aircraft over the next 5 years.

With recovery in air-travel demand in the European Union, Ryanair’s fiscal 2022 traffic soared more than 200% year over year to 97.1 million (but still down 35% from pre-pandemic levels).

Revenues jumped more than 100% year over year to €4.80 billion in fiscal 2022 due to improvement in air-travel demand. Scheduled revenues accounted for bulk (55.2%) of the top line. Ancillary revenues accounted for the balance.

In February 2019, Ryanair announced a structural overhaul. The carrier announced that it is moving to a group structure with each group having its own CEO and management team.

Michael O'Leary is the group’s CEO. Eddie Wilson is the CEO of the group’s biggest airline, Ryanair DAC.

The company’s fiscal year ends on March 31st.
 

Key Global Macro

Thursday’s U.S. retail sales data looks to be the most important macro data event.

On Monday, with a partly-recognized national holiday underway in the USA and Canada bond markets are closed. Stock markets are open there.

Mainland China’s exports for SEP come out. The prior USD reading was up +8.7% y/y. Imports for SEP also come out. The prior USD reading here was +0.5% y/y.

The Fed’s Kashkari and Waller speak.

On Tuesday, Canada’s CPI for SEP comes out. I see a prior core CPI reading at +1.5% y/y there. That is notable, given the core CPI setting in the USA is at 3.3% y/y for SEP.

On Wednesday, the core CPI for the U.K. comes out for SEP. Their prior reading was +3.6% y/y, a touch above the U.S. core CPI level.

On Thursday, U.S. retail sales for SEP comes out. Expect a +0.3% m/m broad retail sales lift from the SEP data. The prior broad U.S. Retail Sales reading was up +0.1% m/m.

In turn, expect +0.1% m/m from the ex-auto U.S. Retail Sales data. The prior retail sales ex-auto numbers were up +0.1% m/m.

There is a E.U. leader’s summit.

The Eurozone’s core HICP consumer inflation rate for SEP comes out. +2.7% y/y is expected, the same level as the prior +2.7% y/y reading there. Broad HICP should be +1.8% y/y.

Australia’s household unemployment rate gets an update for SEP. It is at 4.2%, nearly identical to the 4.1% U.S. rate.

On Friday, fresh U.S. Housing Starts (prior at 1.36M) and Building Permits (prior at 1.48M) data come out for SEP.
 

Conclusion

When an earnings season get moving, it is always worth it to check the latest facts.

Here is what Zacks Research Director Sheraz Mian wrote down, on Oct. 9th—

(1) Estimates for Q3-24 came down since the start of the quarter, on July 1st, 2024.

The magnitude of estimate cuts is significantly bigger than what we had seen, in the comparable periods of other recent quarters.

This negative shift in the revisions trend sharply contrasts the prior favorable development, on this front, in recent quarters.

(2) Zacks expects total S&P 500 earnings to be up +3.1% from the same period last year, on +4.4% higher revenues.

Estimates came down since the start of the period, with the current +3.1% growth pace down from +6.9%, at the start of July.

Q3-24 will be the 5th consecutive quarter of double-digit earnings growth (up +11.5%) for the Tech sector.

Excluding the Tech sector’s contribution? Q3-24 earnings for the rest of the S&P 500 index would be down -0.2%.

(3) Zacks expects S&P 500 earnings growth accelerates, after modest growth in Q3-24.

We forecast double-digit earnings growth for the S&P 500 index — in each of the following four quarters.

(4) Not only is the year-over-year growth pace in aggregate earnings is expected to accelerate over the next four periods...

Zacks expects the absolute dollar level of quarterly earnings to also reach new all-time records, in each quarter.

That’s it for me!

Enjoy and excellent week, trading and investing.

John Blank, PhD.
Zacks Chief Equity Strategist and Economist