Bank Earnings

Central banks will continue to drive equities: global week ahead – June 20, 2022

The World week ahead

Forget S&P 500 earnings estimates for now. Transactions in the financial markets have been entirely linked to new key macroeconomic data and macroeconomic political events these days.

On Monday, the People’s Bank of China (PBoC) offers an interest rate decision.

On Wednesday, the president of the Fed, Powell, is aimed at the senatorial banking committee.

Next in importance are all the details on the European Central Bank‘s (ECB) plan to prevent rate hikes from hurting the euro zone’s weaker economies. This will be of interest to traders.

In emerging markets, there is no hike discount:

  • – Egypt and the central banks of the Czech Republic are also up to the task.
  • – Une valeur aberrante majeure rejette ici un besoin de resserrement: la Turquie. This central bank updates Thursday.

Of all the central banks of the major developed countries which, until recently, considered consumer price inflation to be transitory, one still stands out: the Bank of Japan.

But Reuters writes that he is increasingly being challenged by hedge funds, who are betting he can’t hold the line on a super-dovish policy forever.

Next are Reuters’ five global market themes, rearranged for equity traders:

(1) Fed Chairman Powell testifies before the Senate Banking Committee on Wednesday

Fresh from the Federal Reserve’s biggest rate hike in nearly three decades, Fed Chairman Jerome Powell will be in the spotlight on Wednesday when he testifies before the Senate Banking Committee.

Soaring inflation forced the Fed to raise interest rates by 75 basis points on June 15 and mark a faster rate hike path. But he also predicted a slowing economy and rising unemployment, highlighting a delicate balancing act ahead.

The testimony will allow Powell to hammer home his determination to stifle inflation.

But with the S&P 500 down -20% from record highs in January and prices of other assets falling, it could be questioned how the Fed can get inflation under control without causing too much turbulence in the economy. economy and markets.

(2) Last week, the European Central Bank promised additional support. What type?

The ECB is pledging additional support to the indebted southern shore of the euro bloc, seeking to calm the angst caused by its policy tightening plans.

So far, all we know is that the new regime can impose flexible conditions. Investors, eager to know what form the tool could take, will be on the lookout for clues.

Bond markets reacted with relief to the ECB’s plan. But investors are impatient and may soon test its resolve to contain tensions in the bond market.

Having had to reverse the trend just six days after failing to reassure markets that they would keep borrowing costs under control, ECB officials know time is running out.

(3) On Thursday, the central bank of Turkey meets. A big crisis in southern Europe is preparing?

Turkey’s central bank policymakers will meet on Thursday to discuss interest rate developments. The answer, however, is already known: nowhere. This means that the pressure on LIRA will increase further.

Despite dwindling foreign exchange reserves and inflation above 70%, interest rates are stuck at 14%, due to pressure from President Tayyip Erdogan for lower rates.

Instead, a certain number of measures – largely considered as not solving the central problem of inflation of inflation – were introduced to protect the inhabitants from the benefits of a currency which has lost around 90 % of its value over the past decade.

  • – On Wednesday, Czech rates could rise by 100 basis points
  • – Indonesia could launch its tightening round on Thursday
  • – Later in the day, Mexico could increase the rates by 75 BPS while
  • – Egypt may continue to hike after last month’s 200 bps move

(4) On Thursday, a number of June’s leading Purchasing Managers’ Indexes (PMIs) land

The anticipated readings of the indices of the purchasing directors (PMI) of June, expected on Thursday, will bring interesting content, showing how companies faced the outbreak of the cost of capital this month and the deterioration of the feeling of consumers .

So far this year, European and US PMIs have held above the 50 mark, while China’s zero-COVID policies have dragged Asia into contraction.

Now, however, European and US PMIs are going the other way as higher borrowing costs bite. Economists polled by Reuters expect June PMIs to show further modest weakness.

PMI observers could choose to target Asia, where readings increased in May and could do so again this month, while whole sections of China have emerged and the authorities have intensified their investments .

And the return of Chinese PMIs to expansionary territory would be a plus for the global economy.

The Bank of Japan has defied the stance of monetary policy globally, sticking to ultra-easy parameters and pledging to buy 10-year bonds every day to anchor borrowing costs .

The result is a falling yen, a warping yield curve and a bond market that nearly collapses in the struggle between hedge funds and policymakers.

Meanwhile, the cost of living in Japan is rising and with July’s midterm elections approaching, the BOJ may face political pressure to moderate its efforts to raise inflation.

This could intensify if inflation data due on Friday shows price growth above target for a second month in a row.

Top Zacks #1 Ranking Stock

Les sociétés pétrolières et gazières continuent de dominer notre liste n°1. But I’m bored with it.

Here’s what else I found.

(1) Baidu (BIDU free report): Yes. The big name in Internet search in Mainland China.

I see a stock price of $137 and a market cap of $47.5 billion. The Zack Value score is C, the Zacks Growth is D and the Zacks Momentum score is C.

(2) Dollar Tree (LTRD free report): Hmmm. Un magasin de détail américain à rabais important a fait notre liste n ° 1.

I see a stock price of $151 and a market cap of $33.9 billion. The Zack Value score is D, the Zacks Growth is B score and the Zacks Momentum score is D.

(3) Dell Technologies (Dell free report): The PC vendor also made the No. 1 list, although its narrative is now that it’s an Info Tech solutions provider. The Company’s operating segment includes Client Solutions, Enterprise Solutions Group and Dell Software Group.

Je vois un cours de l’action de 46 $ et une capitalisation boursière de 33,9 M$. The Zack Value East score, the Zacks Growth is B score and the Zacks Momentum score is D.

I found this interesting: US tech stocks offer great value to investors. Now.

The Nasdaq led us down.

L’attaquant du NASDAQ P / E a été réduit de -41% par rapport à son récent pic. This is similar to the drop in tech stocks seen during the September 2008 crash.

At the time, the decline in tech stock didn’t stop there. The value of Nasdaq shares fell another -10%.

Is this time different?

Key global macro

The week leads with an interest rate decision from the Popular China Bank.

On Mondaythe People’s Bank of China (PBoC) interest rate remained unchanged at a one-year prime rate of 3.70%, while the benchmark 5-year rate for mortgages remained stable at 4.45 %.

TuesdayReserve Bank of Australia (RBA) Lowe delivers a speech.

Existing home sales in the United States for May are expected to be 5.39 million, compared to 5.61 million the previous month.

WednesdayThere is a meeting of the European Central Bank (ECB) of non -monetary policy.
Fed Chairman Powell testifies.

Thursday, A two-day European Union (EU) leader begins. Someone in the UK needs to explain to me: why is it better for the UK not to be part of this group?

The US global manufacturing PMI is expected to be solid at 57.3, in line with the previous month’s 57.0.

Fridaythe University of Michigan consumer sentiment index for June should be confirmed at a very low level of 50.2.

Conclusion

I wrote to begin with that earnings estimates aren’t driving stocks these days.

It is totally true.

But the second trimester will end in a few weeks. Then we will see second quarter earnings pouring in throughout July.

On that forward-thinking note, here’s what Zacks’ director of research, Sheraz Mian, had for us on June 15:

  • +2.1% same period last year +9.6%
  • – Excluding the strong contribution from the energy sector, total second-quarter earnings for the rest of the S&P 500 are expected to be down -5.1% on +7.4% higher incomes.
  • – Looking at the calendar year picture, total S&P 500 earnings should be up +9.0% in 2022 and +9.0% in 2023. Excluding Energy, the total revenues of the 2022 index would be up by +3.7% (instead of +9.0%, with Energy).

Note that S&P 500 annual earnings of +9.0 2022 drop to +3.7% with energy?

It hits me like a fly in an ointment. All we need is for global oil prices to crash and much of the annual earnings growth to evaporate.

Again, this is a bearish write. This bear market is likely priced at a high price.

That’s all for me.

Good business week.

Best wishes,

white jeans
Zacks Chief Equity Strategist and Economist