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The Global Week Ahead? Trading it is all about Thursday’s U.S. nonfarm payroll print (not Friday!).
In front of that tale for the tape, traders get the private ADP payroll data on Wednesday.
Stagnant share markets need to see a positive jobs surprise. The rising coronavirus data in the U.S. is not helping sentiment globally.
Consensus is looking for 3 million job adds on the ADP data and 4 million job adds, give or take 1 million, on the U.S. Federal data.
Next are Reuters’ five world market themes, reordered for equity traders.
(1) U.S. Macro Data Continues to Surprise the Pessimists
After the dire numbers of April and May, recent U.S. economic dataflow has delivered good news for the most part, helping keep stock markets within 10% of their pre-coronavirus levels.
On the heels of comebacks in employment and retail sales, Citi’s U.S. Economic Surprise Index, which tracks economic data relative to economists’ expectations, is at a record high.
Now the focus is on whether the rebound remains in force.
Consumer Confidence on Tuesday, manufacturing data on Wednesday and U.S. employment figures on Thursday — both weekly and monthly — are among reports due.
Non-farm jobs reportedly rose +2.5 million in May, versus April’s record -20 million-plus plunge.
Another improvement could allow markets to push higher, bar further coronavirus-linked lockdowns.
(2) Stock Markets at the Mid-Year Mark…
World stocks have been on a rollercoaster ride in the first half of 2020.
Having slumped -35% from Feb. 20th to March 23rd, they are now within 10% of February’s record highs thanks to lashings of fiscal stimulus, interest rates slashed to 0% or below in most major economies, and massive amounts of QE. Borrowing costs for high-grade U.S. companies have in fact fallen below January levels.
So, what happens over the rest of the year?
Much depends on whether another coronavirus wave comes crashing down, further testing policymakers. And if an effective treatment or a vaccine is found, the severest global recession in living memory could also turn out to be the shortest.
Nevertheless, the crisis has exposed weaknesses such as companies’ high debt levels and their over-reliance on share buybacks.
(3) Time to Buy Europe, and Sell U.S. Stocks?
Is the U.S. share juggernaut slowing?
Seems like it.
In the past month, U.S. equities have underperformed world stocks by 2.5%; Europe outperformed by a similar margin. European stocks enjoyed investment inflows in three of the past four weeks, BofA says.
Behind the shift perhaps are the growing odds of a presidential election victory for Democrat Joe Biden, worsening U.S./China ties and the continued rise in U.S. coronavirus infections that prevent economic activity from fully resuming.
Europe, meanwhile, has largely controlled the coronavirus spread, economies are turning the corner quicker than expected and a proposed EU recovery fund is speeding up Eurozone integration.
BlackRock and Goldman Sachs are among those recommending clients shift focus towards European stocks, which lagged U.S. peers throughout the previous economic cycle due to a paucity of “growth” stocks.
European outperformance looks likely until at least November’s U.S. election. Longer-term, though, U.S. firms — such as tech names — may face headwinds from higher taxes, especially from a Democratic administration. And in a world where investors attach increasing importance to environmental, social and governance (ESG) credentials, Europe’s higher ESG scores will be a plus.
(4) In Asia, Hong Kong Security Law a Flashpoint for Geopolitics
Asian market anxiety levels look set to rise another notch in coming days due to geopolitical tensions.
Hong Kong will be in the Chinese parliament’s sights when it meets on June 28-30 to finalize a security law aimed at tackling separatism, subversion, terrorism and collusion with foreign forces.
After a year of sometimes violent anti-government and anti-Beijing protests, the focus is on how far-reaching the law is, what activities constitute such crimes and what the punishment would be. Investors also want to know whether the laws will be retroactive or create new avenues for asset seizures.
China and much of Asia will also publish manufacturing surveys. But as North Korea’s military threats ebb and flow and troops amass on both sides of a disputed part of the Indo-Chinese border, geopolitics will likely trump other factors.
(5) Wither Consumer Inflation in the Age of Coronavirus?
Economies are bouncing back from the COVID-19 shock, so will inflation follow? Preliminary June euro area data may offer clues.
Already, inflation expectations are reacting to data showing the worst of the economic gloom has lifted; a long-term gauge of where markets see Eurozone inflation headed is just above 1% — near its highest since early-March and almost 40 bps above record lows hit that month.
Some investors are already buying gold and other inflation hedging assets. But others say that if you dig deeper into activity indicators, they suggest little evidence of inflationary pressures picking up. And until that happens, expect the ECB to keep its foot on the stimulus pedal.
Top Zacks #1 Rank (STRONG BUY) Stocks
Let’s look into three telco-related stocks. One is in China, one is in Germany, and one is focused on the USA.
Comparing their share metrics tell us an interesting story. China and European listed shares are cheap and cheaper, respectively. The U.S. candidate is absurdly overpriced.
China Mobile (CHL - Free Report) : This is a $139B market cap stock when the share price is $34. I see a Zacks Value score of A, a Zacks Growth score of B, and a Zacks Momentum score of B.
Deutsche Telecom AG (DTEGY - Free Report) : This is a $77B market cap stock when the share price is $16. I see a Zacks Value score of A, a Zacks Growth score of C, and a Zacks Momentum score of C.
Zoom Video (ZM - Free Report) : This is a $72B market cap stock when the share price is $256. I see a Zacks Value score of F, a Zacks Growth score of A, and a Zacks Momentum score of D.
Key Global Macro
U.S. markets will be shut on Friday July 3rd ahead of Independence Day. There will be an early 2pm ET bond market close on Thursday, too.
On Monday, the state’s version of China’s PMIs will be updated for June. Consensus has 50.5 for manufacturing and 53.7 for services.
Germany (+0.6% y/y) and Spain (-0.5% y/y) release their CPI data.
On Tuesday, Colombia’s central bank is expected to cut its overnight lending rate. By how much? Expect a 25 basis point cut.
June Eurozone CPI should see core CPI slide from the +1.3% y/y peak rate last year, to +0.8% y/y.
Italy (-0.3% y/y) and France (+0.5% y/y) update their CPIs, too.
On Wednesday, the U.S. ADP private payroll report should show +3M job additions.
The critical U.S. ISM-manufacturing report for June comes out. A best guess: the composite headline reading jumps higher by about five points to a 48 reading. 50 divides between expansion (above) and contraction (below).
The U.S. FOMC left behind many unanswered questions following their June 10th meeting. Minutes to their June 9th –10th meeting get released at 2pm ET.
The little-changed NAFTA 2.0/CUSMA deal will be implemented today.
On Thursday, China’s private Caixin PMIs likely mirror the state versions. Consensus has 50.7 for manufacturing and 53.3 for services.
Sweden’s Riksbank should leave their 0.0% policy rate in place.
U.S nonfarm payrolls for June will be the next major piece of evidence of an economic recovery.
Best guesses? Figure on 4 million U.S. jobs recovered in June. But to be off by a million? — That wouldn’t be a surprise.
On Friday, U.S. stock markets will be closed for Independence Day. It is actually on Saturday, July 4th this year.
Conclusion
Want useful lessons gleaned from earnings reports, during a short 4-day trading week?
Keep your eyes and ears on:
Zacks #2 Rank (BUY) and Zacks VGM B-rated Micron (MU - Free Report) reports about chips AMC on Monday, and
Zacks #3 Rank (HOLD) and Zacks VGM A-rated FedEx (FDX - Free Report) reports about shipping deliveries AMC on Tuesday
When it comes to broader share fundamentals, shared during this Global Week Ahead?
Hope for the best – on Thursday’s U.S. nonfarm payroll data.
But plan for the worst.
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 >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
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Picking Up Steam... Or Scared? Global Week Ahead
The Global Week Ahead? Trading it is all about Thursday’s U.S. nonfarm payroll print (not Friday!).
In front of that tale for the tape, traders get the private ADP payroll data on Wednesday.
Stagnant share markets need to see a positive jobs surprise. The rising coronavirus data in the U.S. is not helping sentiment globally.
Consensus is looking for 3 million job adds on the ADP data and 4 million job adds, give or take 1 million, on the U.S. Federal data.
Next are Reuters’ five world market themes, reordered for equity traders.
(1) U.S. Macro Data Continues to Surprise the Pessimists
After the dire numbers of April and May, recent U.S. economic dataflow has delivered good news for the most part, helping keep stock markets within 10% of their pre-coronavirus levels.
On the heels of comebacks in employment and retail sales, Citi’s U.S. Economic Surprise Index, which tracks economic data relative to economists’ expectations, is at a record high.
Now the focus is on whether the rebound remains in force.
Consumer Confidence on Tuesday, manufacturing data on Wednesday and U.S. employment figures on Thursday — both weekly and monthly — are among reports due.
Non-farm jobs reportedly rose +2.5 million in May, versus April’s record -20 million-plus plunge.
Another improvement could allow markets to push higher, bar further coronavirus-linked lockdowns.
(2) Stock Markets at the Mid-Year Mark…
World stocks have been on a rollercoaster ride in the first half of 2020.
Having slumped -35% from Feb. 20th to March 23rd, they are now within 10% of February’s record highs thanks to lashings of fiscal stimulus, interest rates slashed to 0% or below in most major economies, and massive amounts of QE. Borrowing costs for high-grade U.S. companies have in fact fallen below January levels.
So, what happens over the rest of the year?
Much depends on whether another coronavirus wave comes crashing down, further testing policymakers. And if an effective treatment or a vaccine is found, the severest global recession in living memory could also turn out to be the shortest.
Nevertheless, the crisis has exposed weaknesses such as companies’ high debt levels and their over-reliance on share buybacks.
(3) Time to Buy Europe, and Sell U.S. Stocks?
Is the U.S. share juggernaut slowing?
Seems like it.
In the past month, U.S. equities have underperformed world stocks by 2.5%; Europe outperformed by a similar margin. European stocks enjoyed investment inflows in three of the past four weeks, BofA says.
Behind the shift perhaps are the growing odds of a presidential election victory for Democrat Joe Biden, worsening U.S./China ties and the continued rise in U.S. coronavirus infections that prevent economic activity from fully resuming.
Europe, meanwhile, has largely controlled the coronavirus spread, economies are turning the corner quicker than expected and a proposed EU recovery fund is speeding up Eurozone integration.
BlackRock and Goldman Sachs are among those recommending clients shift focus towards European stocks, which lagged U.S. peers throughout the previous economic cycle due to a paucity of “growth” stocks.
European outperformance looks likely until at least November’s U.S. election. Longer-term, though, U.S. firms — such as tech names — may face headwinds from higher taxes, especially from a Democratic administration. And in a world where investors attach increasing importance to environmental, social and governance (ESG) credentials, Europe’s higher ESG scores will be a plus.
(4) In Asia, Hong Kong Security Law a Flashpoint for Geopolitics
Asian market anxiety levels look set to rise another notch in coming days due to geopolitical tensions.
Hong Kong will be in the Chinese parliament’s sights when it meets on June 28-30 to finalize a security law aimed at tackling separatism, subversion, terrorism and collusion with foreign forces.
After a year of sometimes violent anti-government and anti-Beijing protests, the focus is on how far-reaching the law is, what activities constitute such crimes and what the punishment would be. Investors also want to know whether the laws will be retroactive or create new avenues for asset seizures.
China and much of Asia will also publish manufacturing surveys. But as North Korea’s military threats ebb and flow and troops amass on both sides of a disputed part of the Indo-Chinese border, geopolitics will likely trump other factors.
(5) Wither Consumer Inflation in the Age of Coronavirus?
Economies are bouncing back from the COVID-19 shock, so will inflation follow? Preliminary June euro area data may offer clues.
Already, inflation expectations are reacting to data showing the worst of the economic gloom has lifted; a long-term gauge of where markets see Eurozone inflation headed is just above 1% — near its highest since early-March and almost 40 bps above record lows hit that month.
Some investors are already buying gold and other inflation hedging assets. But others say that if you dig deeper into activity indicators, they suggest little evidence of inflationary pressures picking up. And until that happens, expect the ECB to keep its foot on the stimulus pedal.
Top Zacks #1 Rank (STRONG BUY) Stocks
Let’s look into three telco-related stocks. One is in China, one is in Germany, and one is focused on the USA.
Comparing their share metrics tell us an interesting story. China and European listed shares are cheap and cheaper, respectively. The U.S. candidate is absurdly overpriced.
China Mobile (CHL - Free Report) : This is a $139B market cap stock when the share price is $34. I see a Zacks Value score of A, a Zacks Growth score of B, and a Zacks Momentum score of B.
Deutsche Telecom AG (DTEGY - Free Report) : This is a $77B market cap stock when the share price is $16. I see a Zacks Value score of A, a Zacks Growth score of C, and a Zacks Momentum score of C.
Zoom Video (ZM - Free Report) : This is a $72B market cap stock when the share price is $256. I see a Zacks Value score of F, a Zacks Growth score of A, and a Zacks Momentum score of D.
Key Global Macro
U.S. markets will be shut on Friday July 3rd ahead of Independence Day. There will be an early 2pm ET bond market close on Thursday, too.
On Monday, the state’s version of China’s PMIs will be updated for June. Consensus has 50.5 for manufacturing and 53.7 for services.
Germany (+0.6% y/y) and Spain (-0.5% y/y) release their CPI data.
On Tuesday, Colombia’s central bank is expected to cut its overnight lending rate. By how much? Expect a 25 basis point cut.
June Eurozone CPI should see core CPI slide from the +1.3% y/y peak rate last year, to +0.8% y/y.
Italy (-0.3% y/y) and France (+0.5% y/y) update their CPIs, too.
On Wednesday, the U.S. ADP private payroll report should show +3M job additions.
The critical U.S. ISM-manufacturing report for June comes out. A best guess: the composite headline reading jumps higher by about five points to a 48 reading. 50 divides between expansion (above) and contraction (below).
The U.S. FOMC left behind many unanswered questions following their June 10th meeting. Minutes to their June 9th –10th meeting get released at 2pm ET.
The little-changed NAFTA 2.0/CUSMA deal will be implemented today.
On Thursday, China’s private Caixin PMIs likely mirror the state versions. Consensus has 50.7 for manufacturing and 53.3 for services.
Sweden’s Riksbank should leave their 0.0% policy rate in place.
U.S nonfarm payrolls for June will be the next major piece of evidence of an economic recovery.
Best guesses? Figure on 4 million U.S. jobs recovered in June. But to be off by a million? — That wouldn’t be a surprise.
On Friday, U.S. stock markets will be closed for Independence Day. It is actually on Saturday, July 4th this year.
Conclusion
Want useful lessons gleaned from earnings reports, during a short 4-day trading week?
Keep your eyes and ears on:
When it comes to broader share fundamentals, shared during this Global Week Ahead?
Hope for the best – on Thursday’s U.S. nonfarm payroll data.
But plan for the worst.
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 >>