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While the Global Week Ahead is not the start of earnings season, there are major company reports worth learning from -- in this COVID-19 environment.
For me, the U.S. companies to watch for 2020 earnings and revenue growth catalysts are solid growth-ranked major companies, in a variety of consumers spaces.
Lay Z Boy (LZB - Free Report) AMC on Tuesday. The Zacks style scores are A for Value, A for Growth and A for Momentum. How are consumers handling furniture sales now?
Winnebago (WGO - Free Report) BMO on Wednesday. The Zacks style scores show a B for Value and an A for Growth. How are consumers handling mobile recreation home sales now?
KB Home (KBH - Free Report) AMC on Wednesday. I see Zacks style scores to like. There is a B for Value and a B for Growth. How are single family home builders seeing traffic now?
and
Rite Aid BMO on Thursday. I see a Zacks D for Value and a B for Growth. This is the 3rd largest retail drugstore in the USA.
Next are Reuters’ five world market themes, re-ordered for equity traders.
(1) Re-setting the Russell 2000 Small Cap Share Index Happens
After one of the most severe equity market selloffs in decades comes the June 26 “Russell Recon,” the once-a-year re-jig of FTSE Russell’s U.S. index range, tracked by over $9 trillion in assets.
Bank of America analysts predict big changes this year, with a greater skew towards mega-cap tech stocks. Those “moving up” may include names such as Zoom (ZM - Free Report) , Slack and Crowdstrike (CRWD - Free Report) , which have risen in price amid the shift to remote working.
In healthcare, BofA sees the “biggest style shift” in the mid-cap index, forecasting their share to be reweighted to 23% from 17%.
As funds adjust portfolios for the new weightings and components, reshuffle day tends to bring huge trading volumes, especially towards the end of the session. Last June saw 1.279 billion shares representing $42.59 billion change hands in just 1.14 seconds, according to the Nasdaq index.
(2) Will Central Banks Be Able to Exit from Monetary Stimulus?
Economies are only just exiting stringent coronavirus lockdowns, but some policymakers are already hinting at another kind of exit — from their crisis-related stimulus.
Not all of them, however. The Fed has assured markets it won’t balk at further policy easing. But comments by the Bank of England, the People’s Bank of China and the Norges Bank have surprised some — the latter has even flagged plans to raise rates from 2022.
The BOE cited signs of economic recovery as a reason to slow the pace of its bond buying. And PBOC governor Yi Gang said policymakers should consider the “timely withdrawal of policy tools in advance” because of the potential for a “hangover.” The PBOC is seen not cutting rates for the second straight month.
Data showing UK public debt surpassing 100% of GBP will reinforce fears of a debt surge stemming from emergency blank cheques. Markets aren’t spooked yet, especially as the Fed remains in easing mode. But stay tuned for more exit strategy talk.
(3) Will Purchasing Manager Indexes (PMIs) Show a “V-Shaped” Recovery?
What shape will it be — the V of a swift rebound, or the U of an (eventual) grind higher, punctuated by coronavirus scares, news of job cuts, social unrest and corporate bankruptcies… or the depressing flatline of an L? Flash estimates of June business activity may give us some indication.
Signs are that despite new infections in China and some U.S. states, the worst is over for big economies. Chinese factory activity returned to growth in May, while most countries saw a bounce in retail sales and manufacturing. U.S. and European purchasing managers’ indexes (PMI) turned higher in May even if they remained in contraction territory.
June PMIs should reflect more positive momentum coming through as lockdowns eased further. Then again, recent market swings suggest there’s just one economic indicator in focus for investors these days, and that’s the coronavirus case count.
(4) We Hear from the People’s Bank of China (PBOC)
After tapping on the brakes, is the People’s Bank of China again feeling for the accelerator? The government has flagged a cut to banks’ reserve ratios, which would free up cash for loans. But anyone hoping for a full-throttle response should brace for disappointment.
The PBOC is seen holding interest rates steady in June for the second straight month. It is also draining money from the financial system, aiming to direct stimulus away from arbitrage plays and into the real economy.
Governor Yi Gang has also made clear that any measures are temporary and bring risks of a “hangover.” The easing path ahead seems to be narrow, not broad, and leading to credit rather than cash.
(5) Emerging Markets Central Banks Will Set Up This Week
Not much exit talk in other emerging markets where central banks are trying to reverse some of the economic devastation with swinging interest rate cuts.
Brazil, Russia and Ukraine have delivered big reductions so now the spotlight falls on Turkey, Egypt, Mexico, Philippines and Hungary. Hungary, Philippines and Egypt are likely to leave rates unchanged but may flag some easing for later in the year.
Turkey might be more of an assured bet for a cut on June 25. Its move in May was the ninth straight reduction in an easing cycle that began last July.
Expect a cut in Mexico too, given a 30% drop in April industrial production and below-target inflation. Rates fell to 5.5% last month and JPMorgan predicts an end-2020 rate of 3%.
Top Zacks #1 Rank Stocks
I focus on three top tech stocks this time around.
One from China, one from Japan, and one from the USA.
JD.com (JD - Free Report) : This is the big Mainland China internet commerce stock, after Alibaba, of course. I see a $85B market cap with a $54 share price. The Zacks Value score is C, the Zacks Growth score is D, and the Zacks Momentum score is B.
Tokyo Electron (TOELY - Free Report) : This is a major Japanese chip company. I see a $36B market cap with a $58 share price. The Zacks Value score is C, the Zacks Growth score is A, and the Zacks Momentum score is F.
eBay (EBAY - Free Report) : As yes, the U.S. internet commerce trading site. I see a $33.9B market cap with a $48 share price. The Zacks Value score is C, the Zacks Growth score is C, and the Zacks Momentum score is A.
Key Global Macro
The week for macro kicked off with the Central Bank of China.
On Monday, People’s Bank of China (PBOC) central bank money decisions kicked off the Asian session on Monday morning (this was at Sunday 9:30pm ET). 70% of Reuters’ consensus thought the 1-year prime rate would stay at 3.85%. They were right.
U.S. existing home sales (consensus has -7.9% m/m) are probably not yet at a turning point. May’s reading will likely continue to follow pending home sales lower, given 30–90 day closing periods.
On Tuesday, Markit’s purchasing managers’ indices (PMIs) are generally less widely followed than the ISM gauges. Their release should show marked improvement back toward nearly even odds between expansion and contraction and further away from contraction.
Japan’s manufacturing PMI here should be around the prior 38.4.
Both Eurozone and UK measures of purchasing managers’ indices for the month of June will land. EU composite should be 41.7. EU manufacturing should be 44.5.
U.K. manufacturing should be 45.0.
On Wednesday, the German IFO indexes come out.
Business Climate may go up to 85.0, Current Assessment may go up to 84.0, and Expectations may go up to 86.6.
On Thursday, the central bank of Mexico (Banxico) should cut its overnight rate by 50 bps to 5.0%.
Turkey may cut its policy rate to 8.0% from 8.25%.
U.S. consumer sector gauges should see the resumption of progress along with falling U.S. weekly jobless claims. Those will come out on this day.
On Friday, U of Michigan consumer sentiment should be 78.9. That’s weak.
Conclusion
What actions did China's central bank take on Monday?
The PBOC pumped cash into China’s banking system via reverse repos to maintain liquidity.
The People's Bank of China injected a total of 120 billion yuan (about 16.93 billion U.S. dollars) into the market, including 40 billion yuan through seven-day reverse repos at an interest rate of 2.2% and 80 billion yuan of 14-day contract at an interest rate of 2.35%, according to a statement on the website of the central bank.
The move is intended to maintain stable liquidity in the banking system, the central bank said.
The one-year loan prime rate (LPR) remained at 3.85%, while the five-year LPR was also steady at 4.65%.
There were no signs from the PBOC on when they may withdraw money stimulus.
They could be the first-mover on that, in a COVID19 age.
Have a Great Trading Week!
Regards,
John Blank
Will you retire a millionaire?
One out of every six people retires a multimillionaire. Get smart tips you can do today to become one of them in a new Special Report, “7 Things You Can Do Now to Retire a Multimillionaire.”
Image: Bigstock
How Is the U.S. Consumer? Global Week Ahead
While the Global Week Ahead is not the start of earnings season, there are major company reports worth learning from -- in this COVID-19 environment.
For me, the U.S. companies to watch for 2020 earnings and revenue growth catalysts are solid growth-ranked major companies, in a variety of consumers spaces.
Lay Z Boy (LZB - Free Report) AMC on Tuesday. The Zacks style scores are A for Value, A for Growth and A for Momentum. How are consumers handling furniture sales now?
Winnebago (WGO - Free Report) BMO on Wednesday. The Zacks style scores show a B for Value and an A for Growth. How are consumers handling mobile recreation home sales now?
KB Home (KBH - Free Report) AMC on Wednesday. I see Zacks style scores to like. There is a B for Value and a B for Growth. How are single family home builders seeing traffic now?
and
Rite Aid BMO on Thursday. I see a Zacks D for Value and a B for Growth. This is the 3rd largest retail drugstore in the USA.
Next are Reuters’ five world market themes, re-ordered for equity traders.
(1) Re-setting the Russell 2000 Small Cap Share Index Happens
After one of the most severe equity market selloffs in decades comes the June 26 “Russell Recon,” the once-a-year re-jig of FTSE Russell’s U.S. index range, tracked by over $9 trillion in assets.
Bank of America analysts predict big changes this year, with a greater skew towards mega-cap tech stocks. Those “moving up” may include names such as Zoom (ZM - Free Report) , Slack and Crowdstrike (CRWD - Free Report) , which have risen in price amid the shift to remote working.
In healthcare, BofA sees the “biggest style shift” in the mid-cap index, forecasting their share to be reweighted to 23% from 17%.
As funds adjust portfolios for the new weightings and components, reshuffle day tends to bring huge trading volumes, especially towards the end of the session. Last June saw 1.279 billion shares representing $42.59 billion change hands in just 1.14 seconds, according to the Nasdaq index.
(2) Will Central Banks Be Able to Exit from Monetary Stimulus?
Economies are only just exiting stringent coronavirus lockdowns, but some policymakers are already hinting at another kind of exit — from their crisis-related stimulus.
Not all of them, however. The Fed has assured markets it won’t balk at further policy easing. But comments by the Bank of England, the People’s Bank of China and the Norges Bank have surprised some — the latter has even flagged plans to raise rates from 2022.
The BOE cited signs of economic recovery as a reason to slow the pace of its bond buying. And PBOC governor Yi Gang said policymakers should consider the “timely withdrawal of policy tools in advance” because of the potential for a “hangover.” The PBOC is seen not cutting rates for the second straight month.
Data showing UK public debt surpassing 100% of GBP will reinforce fears of a debt surge stemming from emergency blank cheques. Markets aren’t spooked yet, especially as the Fed remains in easing mode. But stay tuned for more exit strategy talk.
(3) Will Purchasing Manager Indexes (PMIs) Show a “V-Shaped” Recovery?
What shape will it be — the V of a swift rebound, or the U of an (eventual) grind higher, punctuated by coronavirus scares, news of job cuts, social unrest and corporate bankruptcies… or the depressing flatline of an L? Flash estimates of June business activity may give us some indication.
Signs are that despite new infections in China and some U.S. states, the worst is over for big economies. Chinese factory activity returned to growth in May, while most countries saw a bounce in retail sales and manufacturing. U.S. and European purchasing managers’ indexes (PMI) turned higher in May even if they remained in contraction territory.
June PMIs should reflect more positive momentum coming through as lockdowns eased further. Then again, recent market swings suggest there’s just one economic indicator in focus for investors these days, and that’s the coronavirus case count.
(4) We Hear from the People’s Bank of China (PBOC)
After tapping on the brakes, is the People’s Bank of China again feeling for the accelerator? The government has flagged a cut to banks’ reserve ratios, which would free up cash for loans. But anyone hoping for a full-throttle response should brace for disappointment.
The PBOC is seen holding interest rates steady in June for the second straight month. It is also draining money from the financial system, aiming to direct stimulus away from arbitrage plays and into the real economy.
Governor Yi Gang has also made clear that any measures are temporary and bring risks of a “hangover.” The easing path ahead seems to be narrow, not broad, and leading to credit rather than cash.
(5) Emerging Markets Central Banks Will Set Up This Week
Not much exit talk in other emerging markets where central banks are trying to reverse some of the economic devastation with swinging interest rate cuts.
Brazil, Russia and Ukraine have delivered big reductions so now the spotlight falls on Turkey, Egypt, Mexico, Philippines and Hungary. Hungary, Philippines and Egypt are likely to leave rates unchanged but may flag some easing for later in the year.
Turkey might be more of an assured bet for a cut on June 25. Its move in May was the ninth straight reduction in an easing cycle that began last July.
Expect a cut in Mexico too, given a 30% drop in April industrial production and below-target inflation. Rates fell to 5.5% last month and JPMorgan predicts an end-2020 rate of 3%.
Top Zacks #1 Rank Stocks
I focus on three top tech stocks this time around.
One from China, one from Japan, and one from the USA.
JD.com (JD - Free Report) : This is the big Mainland China internet commerce stock, after Alibaba, of course. I see a $85B market cap with a $54 share price. The Zacks Value score is C, the Zacks Growth score is D, and the Zacks Momentum score is B.
Tokyo Electron (TOELY - Free Report) : This is a major Japanese chip company. I see a $36B market cap with a $58 share price. The Zacks Value score is C, the Zacks Growth score is A, and the Zacks Momentum score is F.
eBay (EBAY - Free Report) : As yes, the U.S. internet commerce trading site. I see a $33.9B market cap with a $48 share price. The Zacks Value score is C, the Zacks Growth score is C, and the Zacks Momentum score is A.
Key Global Macro
The week for macro kicked off with the Central Bank of China.
On Monday, People’s Bank of China (PBOC) central bank money decisions kicked off the Asian session on Monday morning (this was at Sunday 9:30pm ET). 70% of Reuters’ consensus thought the 1-year prime rate would stay at 3.85%. They were right.
U.S. existing home sales (consensus has -7.9% m/m) are probably not yet at a turning point. May’s reading will likely continue to follow pending home sales lower, given 30–90 day closing periods.
On Tuesday, Markit’s purchasing managers’ indices (PMIs) are generally less widely followed than the ISM gauges. Their release should show marked improvement back toward nearly even odds between expansion and contraction and further away from contraction.
Japan’s manufacturing PMI here should be around the prior 38.4.
Both Eurozone and UK measures of purchasing managers’ indices for the month of June will land. EU composite should be 41.7. EU manufacturing should be 44.5.
U.K. manufacturing should be 45.0.
On Wednesday, the German IFO indexes come out.
Business Climate may go up to 85.0, Current Assessment may go up to 84.0, and Expectations may go up to 86.6.
On Thursday, the central bank of Mexico (Banxico) should cut its overnight rate by 50 bps to 5.0%.
Turkey may cut its policy rate to 8.0% from 8.25%.
U.S. consumer sector gauges should see the resumption of progress along with falling U.S. weekly jobless claims. Those will come out on this day.
On Friday, U of Michigan consumer sentiment should be 78.9. That’s weak.
Conclusion
What actions did China's central bank take on Monday?
The PBOC pumped cash into China’s banking system via reverse repos to maintain liquidity.
The People's Bank of China injected a total of 120 billion yuan (about 16.93 billion U.S. dollars) into the market, including 40 billion yuan through seven-day reverse repos at an interest rate of 2.2% and 80 billion yuan of 14-day contract at an interest rate of 2.35%, according to a statement on the website of the central bank.
The move is intended to maintain stable liquidity in the banking system, the central bank said.
The one-year loan prime rate (LPR) remained at 3.85%, while the five-year LPR was also steady at 4.65%.
There were no signs from the PBOC on when they may withdraw money stimulus.
They could be the first-mover on that, in a COVID19 age.
Have a Great Trading Week!
Regards,
John Blank
Will you retire a millionaire?
One out of every six people retires a multimillionaire. Get smart tips you can do today to become one of them in a new Special Report, “7 Things You Can Do Now to Retire a Multimillionaire.”
Click to get it free >>