In-depth Analysis

Weekly Outlook 1-5 August

 

What to Expect in the Markets This Week?

On Monday 1st: Manufacturing #PMI for Germany, Spain, France, Italy, Japan and the United States.

On Tuesday 2nd: #RBA monetary policy meeting, and the #JOLTS in the United States.

On Wednesday 3rd: #Employment change and #unemploymentrate of New Zealand, and Service and Composite #PMI from Japan, China, Spain, Italy, Germany, the United Kingdom, and the United States.

On Thursday 4th: #Tradebalance of Australia, Canada, and the United States, and #BankofEngland monetary policy meeting.

On Friday 5th: #NFP report.

Past week big earnings

  • Microsoft missed expectations with an adjusted EPS of $2.23 and revenues of $51.9B. Still, the company increased its revenues by 12% yoy and the revenues from the fastest-growing segment of the company, Microsoft’s Azure and other cloud services, grew by 40%. 
  • Alphabet missed on earnings and revenue for the second quarter with $69.69 billion in revenue (+13% vs a +62% growth during the same quarter last year) and $1.21 per share. YouTube isn’t a bright spot for the company anymore, as it also missed projections due to higher competition, bringing in $7.34 billion compared to an expected $7.52 billion.
  • Visa topped markets’ expectations: third-quarter revenue rose to $7.3 billion vs. $7.1 billion expected and the firm earned $3.41 billion, or $1.60 per share, versus $2.58 billion, or $1.18 per share, a year earlier. Visa’s volume of payments went up by 12%, and the number of transactions it processed went up by 16%.
  • McDonald’s beat expectations: the company made $2.55 per share and $5.72 billion in sales during its second quarter.
  • Continued low advertising demand is putting pressure on Facebook’s earnings, which are falling short of what markets had hoped for with earnings of $2.46 per share, revenues of $28.82 billion, Daily Active Users (DAUs) of 1.97 billion, and Average Revenue per User (ARPU) of $9.82.
  • Apple’s sales and profit were better than what Wall Street expected, but the company’s growth was slower than expected with an EPS of $1.20, revenues of $83 billion (+2% yoy), iPhone revenues of $40.67 billion (+3% yoy), and Services revenues of $19.60 billion (+12% yoy).
  • Amazon lost money for the second quarter in a row, but its earnings were strong. After a loss of $3.8 billion, the company said it lost $2 billion in the second quarter compared to +$7.8 billion from the same period last year. The EPS reached a loss of 20 cents, while revenues reached $121.23 billion.

Weekly outlook

Focus on the RBA’s Cash Rate decision, the BoE’s Official Bank Rate decision and the American NFP

The focus of this week will be the RBA’s Cash Rate decision on Tuesday, followed by the BoE’s Official Bank Rate decision on Thursday. And probably the most anticipated news, the American NFP report, will be published on Friday. Let’s look now at the other important company and economic releases for the week commencing on the 1st of August.

Monday 1st of August

Waking up, European traders will discover how the Chinese manufacturing sector performed in July with different Purchasing Manager Indexes (PMI). Most major economies will also publish their manufacturing PMI figures, such as Germany, Spain, France, Italy, and Japan as well as the United States. 

Remember that the PMI provides a valuable insight into a country’s economic situation, as it represents the rate of expansion/contraction of a given sector, showing potential turning points in an economy.

Most important company announcements of the day:

  • HSBC
  • Pinterest

Tuesday 2nd of August

Continuing on Tuesday the 2nd, traders will mostly focus on the Australian central bank’s decisions on interest rates. In its July meeting, the RBA increased its main interest rate by 50 basis points, up to 1.35%. Will the central bank vote for the classic 25 basis-point hike or  50 basis-points? Or will it follow the ECB and the Fed with a more hawkish move, like a 75 basis point increase? 

In the American trading session, traders will be looking at the JOLTS or Job Openings and Labor Turnover Survey, which helps analysts understand the state of the job vacancies market in the United States, as it assesses the number of open positions, as well as the number of jobs left. While vacancies measure labor demand, jobs left measure labor force turnover.

Most important company announcements of the day:

  • Advanced Micro Devices
  • Caterpillar
  • Starbucks
  • PayPal
  • Gilead Sciences
  • Occidental Petroleum

Wednesday 3rd of August

The day will start with New Zealand publishing figures about its employment situation: the employment change, the unemployment rate, and the labor cost index. Then, traders will follow Service and Composite PMI figures from different countries like Japan, China, Spain, Italy, Germany, and the United Kingdom, as well as the United States.

Most important company announcements of the day:

  • CVS Health
  • Booking Holdings
  • Moderna

Thursday 4th of August

Traders will start their day with the Australian trade balance for the month of June, expected to go down from 15.965B to 10.725B. Canada and the United States will also publish their balance of trade in the afternoon.

The trade balance of a country reveals whether it  exported more goods and services produced domestically to foreign nations during the targeted time than it imported. A nation with a trade deficit is one that imports more goods and services than it exports in value terms, whereas a nation with a trade surplus is one that sells more goods and services than it imports. This statistic is a tool used by economists to gauge the relative health of a nation’s economy. 

Also, remember that the business cycle and other economic factors must be taken into account to better understand the global situation and how it might impact the related currency demand and offer relationship.  

The most important news of the day will probably be the Bank of England monetary policy meeting, which is expected to increase its interest rate by 25 basis points to 1.50%. As usual, traders will be looking for clues about the evolution of the inflation, employment, and growth situation in the country, as well as ways the central bank is planning on addressing potential issues and challenges.

Most important company announcements of the day:

  • Eli Lilly & Co
  • Alibaba
  • Amgen
  • ConocoPhillips

Friday 5th of August

On Friday the 5th, the NFP report will be the most watched economic release. NFP, or Non-Farm Payroll, represents the number of paid workers in the U.S. in the non-agricultural sector. It is one of the most important statistics about the U.S job market, as it gives precious clues about the number of jobs created, unemployment rate, wage inflation, number of hours worked, participation rate, as well as other relevant data. 

While the Non-Farm Payrolls beat analysts’ estimates of 260 000 and defied recession fears by reaching 372 000 in June, things might be different in July, as the number of jobs created is expected to slow down to 255 000, while the unemployment rate is expected to remain unchanged at 3.6%.

 

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