US Elections

Week Ahead - Markets within touching distance of record highs, earnings in focus

George Walker, Friday, 9 October 2020

MKT-6970_WA-MarketsRecordHighs_blog

Markets posted an impressive attempt to rebound from last week’s lows rallying nearly 1000 points as investors cheered the speed of Donald Trump’s recovery from coronavirus, as well as prospect of additional stimulus ahead of the Presidential election early next month. The focus now shifts to US corporate earnings to determine whether equity markets being near record highs is fully justified. Fundamentally, indices are made up of equities so investors will want to see better than expected results from the world’s largest companies to maintain positive sentiment.

With US markets within touching distance of record highs, here’s what to watch!

US Corporate Earnings

Once again earnings season is upon us and could be critical to the performance of equity markets as we head towards year end. Last time out, US companies largely reported earnings ahead of analyst’s expectations, however, the forecasts could have been downplayed somewhat due to the coronavirus pandemic.

There will be many questions being asked as these results hit the wires. The focus potentially might not be fixated on previous quarterly performance but more so on forward guidance. With the global economy having been severely impacted by the coronavirus, many companies might have had to slash forward guidance expectations.

Whether now is the time to start buying back into these companies will depend largely on their results. Cash balance, forward guidance, dividend pay-out expectations, share buybacks and cost cutting will all be scrutinized as investors try and decipher which equities are best place to see out the remainder of the coronavirus effects on trade and recover on the other side.

Among those due to update the markets from the US this week will be Johnson & Johnson, BlackRock, UnitedHealth Group, Taiwan Semiconductor Manufacturing Company, Honeywell International and Schlumberger N.V. We also see most of the major banks such as JP Morgan Chase, Citigroup, Bank of America, Wells Fargo, Morgan Stanley and Bank of New York Mellon update the markets. Banks performed well in the last round of earnings, will we see the same again? This round of results could determine whether the equity market rebound is justified or if we set for a bumpy end to the year.

Investors/traders will need to be aware of the times and dates of these results if trading equities as they are normally released out of hours and as a result, share prices can see large gaps upon the reopening of markets.

Although corporate earnings will likely dominate most of the headlines, macroeconomic data could still play a part in overall sentiment as investors will want to see the underlying health of economies.

BOE Governor Andrew Bailey speech

There isn’t too much in the way of attention-grabbing data out on Monday however, there is a speech from the Bank of England Governor Andrew Bailey in the afternoon. The value of GBP is particularly sensitive to BoE commentary and considering the levels of stimulus applied by the Bank and UK Government to battle the impact of the coronavirus on the UK economy, as well as the UK’s ongoing trade negotiations with the EU, those interested in trading GBP will be paying close attention to what is said in the Governors speech.

As we move into Tuesday, the EURGBP pairing could get off to a lively start as we get Euro Zone Consumer Price Index (CPI) figures followed shortly by Unemployment data from the UK. Inflation and employment both have an impact on the value of a currency due to the direct relation between the figures and monetary policy set by central banks. An hour prior to the open of US markets we get CPI data from the US. The Federal Reserve has refocused on inflation when determining monetary policy stateside so we could see exaggerated price action on the USD following the data release.

Industrial Production data from Japan and the Euro Zone as well as Producer Price Index data from the US in the afternoon completes a quiet Wednesday on the macro front.

Thursday sees the start of a two-day European Council meeting held in Brussels and attended by the heads of nations in which they will discuss all issues concerned with Europe.

Australian Unemployment figures are released overnight as well as Producer and Consumer Price Index data from China.

A focal point for traders will be the initial and continuing jobless claims from the United States given the increased attention on the health of the US jobs market from the Federal Reserve.

Presidential Election Debate Round Two

As the markets close in the US, the world will be focusing on the second Presidential debate between Donald Trump and Joe Biden. If President Trump has fully recovered from his coronavirus infection, the two will face off in Miami Florida. Investors and traders alike will want to see less of the back and forth insults and more on future Government policy. As the debates unfold and polls analyzed, we should start to get a clearer picture of who will be in office come the 3rd November. Whoever is perceived as being the stronger candidate, markets are likely to react so these debates are not to be ignored.

The open of European markets could be an interesting one on final trading day of the week as investors digest the Presidential debate in the US which concludes in the early hours of Friday morning.

On the data front, we get CPI data from the Eurozone during the morning and Retail Sales figures from the US in the afternoon so we could see a flurry of activity in the EURUSD paring ahead of the US open.

It goes without saying that we are still in very volatile and uncertain times. Traders will need to be cautious about sudden announcements and surprises so will need to pay attention to risk controls, exposure and holding positions overnight.

All times indicated are BST.


ECONOMIC CALENDAR (all times are BST)

Monday, 12th October

00:50 JPY Producer Price Index
00:50 JPY Machinery Orders
00:50 JPY Bank Lending
15:00 GBP BoE’s Haskel Speech
17:00 GBP BoE’s Governor Bailey Speech
21:00 NZD REINZ House Price Index

UK Company Announcements:

N/A

US Company Announcements:

TBC

Tuesday, 13th October

02:00 CNY Imports
02:00 CNY Exports
02:00 CNY Trade Balance
07:00 GER Consumer Price Index
07:00 GER Harmonised Index of Consumer Prices
09:30 GBP ILO Unemployment Rate
09:30 GBP Claimant Count Rate
09:30 GBP Claimant Count Change
09:30 GBP Average Earnings Including Bonus
09:30 GBP Average Earnings Excluding Bonus
10:00 GER ZEW Survey – Economic Sentiment
10:00 GER ZEW Survey – Current Situation
10:00 EUR ZEW Survey – Economic Sentiment
11:00 USD NFIB Business Optimism Index
13:30 USD Consumer Price Index
13:30 USD Consumer Price Index Core
13:30 USD Consumer Price Index ex Food & Energy
19:00 USD Monthly Budget Statement
21:30 USD API Weekly Crude Oil Stock

UK Company Announcements:

N/A

US Company Announcements:

Johnson & Johnson
JP Morgan Chase & Co
Citigroup Inc
BlackRock Inc

Wednesday, 14th October

00:30 AUD Westpac Consumer Confidence
02:00 AUD HIA New Home Sales
02:30 AUD National Australia Bank’s Business Confidence
05:30 JPY Industrial Production
05:30 JPY Capacity Utilisation
10:00 EUR Industrial Production
13:30 USD Producer Price Index
13:30 USD Producer Price Index ex Food & Energy
13:55 USD Rebook Index

UK Company Announcements:

N/A

US Company Announcements:
UnitedHealth Group Inc

Bank of America Corporation
Wells Fargo & Co
U.S. Bancorp
Progressive Corporation

Thursday, 15th October

All Day – EUR European Council Meeting
01:30 AUD Unemployment Rate
01:30 AUD Fulltime Employment
01:30 AUD Part-Time Employment
01:30 AUD Participation Rate
01:30 AUD Employment Change
02:30 CNY Consumer Price Index
02:30 CNY Producer Price Index
05:30 JPY Tertiary Industry Index
07:30 CHF Producer and Import Prices
09:30 GBP BoE Credit Conditions Survey
13:30 USD NY Empire State Manufacturing Index
13:30 USD Philadelphia Fed Manufacturing Survey
13:30 USD Initial Jobless Claims
13:30 USD Continuing Jobless Claims
13:30 USD Import Price Index
13:30 USD Export Price Index
13:30 CAD ADP Employment Change
15:30 USD EIA Natural Gas Storage Change
16:00 USD EIA Crude Oil Stocks Change
16:25 GBP Autumn Forecast
21:30 NZD Business NZ PMI

UK Company Announcements:

Centamin
Hays
Mediclinic International
Mondi

US Company Announcements:

Taiwan Semiconductor Manufacturing Company Ltd
Honeywell International Inc
Intuitive Surgical Inc
Morgan Stanley
Truist Financial Corporation

Friday, 16th October

All Day – EUR European Council Meeting
All Day - IMF Meeting
02:00 US Presidential Debate
07:00 GER Producer Price Index
10:00 EUR Trade Balance
10:00 EUR Consumer Price Index
10:00 EUR Consumer Price Index – Core
13:30 USD Retail Sales
13:30 USD Retail Sales ex Autos
13:30 USD Retail Sales Control Group
13:30 CAD Manufacturing Sales
13:30 CAD Retail Sales
13:30 CAD Retail Sales ex Autos
14:15 USD Industrial Production
14:15 USD Capacity Utilisation
15:00 USD Michigan Consumer Sentiment Index
15:00 USD Business Inventories
18:00 USD Baker Hughes US Oil Rig Count

UK Company Announcements:

N/A

US Company Announcements:
Bank of New York Mellon Corp

V.F. Corporation

Schlumberger N.V.

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