Traders' Diary: Everything you need to know about the week ahead

The Economic Week that Was

First up, some spirited global leads, marinated in some finely refined RBA-speak encouraged Aussie equities rise by a combined 3.7% with starring roles for Tech, Materials, Real Estate and Energy Sectors.

The most certainly not-as-Hawkish as could’ve been Wednesday speech by the suddenly ex-RBA Governor Dr P. Lowe (the RBA Deputy Governor Michele Bullock takes over in mid-September) arrived last week along with some welcome signs of slowing global inflation.

In the states, by Saturday morning Sydenham time, US stocks had ended stirred, mixed and even a little shaken after Friday uncertainty but ultimately delivered solid gains throughout a pretty good week, all things considered.

All 3 US stock market benchmarks rose for the week, with the Dow Jones and the gorgeously tech-heavy Nasdaq each cracking their best weekly gains since March straight to the boundary.

The Dow found 2.35%.

The Nasdaq rose 3.3%.

(And hey), The S&P 500 ground out circa 2.4%. Doesn’t sound like much. But that ladies and gents was its best (weekly) innings since mid-June. So it’s batting about on par with Davey Warner.

Unexpectedly moderate US inflation was the catalyst for this kind of typically inspired Wall Street buying, reviving the apparently immortal hopes of the Federal Reserve could soon stop its pattern of interest rate hikes. With June consumer prices and producer prices showing smaller than expected increases, investors are now considering whether a strong economy could push stocks higher by the end of the year.

Earnings season started Friday with reports from some of the big banks, but investor expectations for this season are decidedly downbeat, with the analyst consensus forecasting a 7% year-over-year decline in S&P 500 earnings.

He’s not heavy, he’s my chatbot

Technology continued to dominate proceedings:

Amazon’s (AMZN) Alibaba rip-off ‘Prime Day’ shopping event set a sales record;
Alphabet (GOOG) expanded its artificial intelligence chatbot Bard to Europe and Brazil.
The latest dramas around Microsoft’s (MSFT) planned $69B acquisition of video game maker Activision Blizzard (ATVI) ended on a decent draw – while a US federal judge on Thursday denied the Federal Trade Commission (FTC)’s request to hit pause and axe the mega deal, late on Friday the 9th Circuit Court of Appeals denied the FTC. So is the words of almost forgotten Block Inc – we’re back to Square 1 on that.

Nothing you’d bank on

US banks kicked off the Q2 earnings season on Thursday and Friday but please first lets recall that most of Wall Street has already set a super low bar for what they reckon the banks did in Q2. Thus reminded, the clear anti-leader was Citigroup (C), which fell 4.1% after its earnings misses. A little incompetence, some weak investment banking effort and sluggish market revenue the culprits.

Elsewhere, JPMorgan Chase (JPM) kicked things off for the season on Thursday with an okay earnings beat and raised guidance. It climbed 0.7% on Friday, while Wells Fargo (WFC) posted better than expected results, mainly because the expectations were as promising as life in the Donbas region of Ukraine right now.

WFC shares therefore shot up 3.7%, before everyone remembered and got the hell out before the session closed with WFG short -0.4%.

For the week US shares rose a combined 2.4%. In the EU markets were up 3.5%, Japanese shares were flat and Chinese shares rose 1.9%.

Consistent with the risk on tone bond yields fell sharply, oil, metal and iron ore prices rose and the $A rose as the $US fell sharply.

Economics in briefs

Initial jobless claims fell, but continuing claims rose again continuing their rising trend.

Consumer sentiment up.

Small business optimism (NFIB) up slightly but very weak

The Bank of Canada raised rates again by another 0.25bps to 5%, with the BoC leaning a bit hawkish

UK wages are higher. The UK jobs market appears to be cooling, AMP Capital reckons, with unemployment rising to 4% in May its still tight and with wages growth now at 7.3%yoy will maintain pressure on the BoE with possibly another 0.5% rate hike in August.

“But note that the UK’s problems in controlling inflation and inflation expectations appear to be partly country specific with the inflationary Brexit shock and the difficulty of the BoE in agreeing and then communicating a strategy to contain inflation expectations under its Monetary Policy Committee framework adding to the post pandemic global inflation boost.

“The UK’s experience does nothing to support the application of the same Monetary Policy Board approach to the RBA,” says chief economist Dr Shane Oliver.

The Reserve Bank of NZ left rates on hold as widely expected. Just remember though that they were already out front at 5.5%. They left their guidance for no change to rates until rate cuts in second half 2025 unchanged though. I suspect they will have to cut before then.

The Bank of Korea also left rates on hold, at 3.5%, but has a mild tightening bias.

Japanese producer price inflation slowed further (circa 4%) – another indicator of falling inflation. Last year it peaked at over 10%yoy, btfw.

Chinese economic data for June was soft with exports and imports both falling more than expected, June CPI inflation falling to zilch and producer prices down 5.4%yoy.

The reported dive in Chinese inflation – particularly for producer prices – surely suggests a knock on for softer prices in the US and Australian inflation.

The Economic Week Ahead

At home, the hours this week will roll by without much on the economic front to annoy. The minutes from the last RBA board meeting (Tuesday) are always worth a few seconds, even if just to to see by just how few millimetres we were from a hoist instead of the decision to wait.

Jobs numbers fall for us on Thursday.

Key Chinese economic data will orbit around June quarter GDP growth – which will be a good number, like 7% or thereabouts – but that’s compared to Zero-COVID, so don’t read anything into it.

Chinese industrial production is though to ease again to around a lowly 2.5%yoy, retail sales to a meek 3.3%yoy and investment to a miserable 3.4%year to date… June monthly data is the ultimate read on just how slow China can go.

In the States, June retail sales growth, industrial production and the July home builders’ index (all due Tuesday).

June housing starts (Wednesday), existing home sales (Thursday) and (ongoing softness) in manufacturing conditions in July.

Canadian, UK and NZ inflation data for June will be released on Tuesday and Wednesday.

Japanese June CPI inflation (Friday) is expected to fall back to 3.1%yoy from 3.2% with core inflation also falling slightly to 2.5%yoy.

Also some fun stuff from a Brit POV:

Another sleepy Sunday in New Zealand seemed a good a time as any for the British business and trade secretary Kemi Badenoch, to go get some of that tasty Comprehensive and Progressive Agreement for Trans-Pacific Partnership. The Poms popped up in Auckland and by formally signing up for the now 11-team Indo-Pacific CPTPP, they’ve finally replaced the European Union bloc, with an almost entirely incomprehensible comprehensive trade deal.

Circa 99% of the all UK goods exported to CPTPP countries like – ourselves truly – the Canucks, the Kiwis, Mexico, Japan, Vietnam, Singapore etc etc – would get the zero tariff treatment they was already getting back in their All Euro days.

Sunday morning our time, Kemi Badenoch said the ascension to the CPTPP would make London the first European…, um… er close to European, or almost… er geographically EU-ish nation to join the bloc, making it instantly less of an international pariah and more of a snout at the partnership’s $15 point something trillion annual GDP trough.

The Australian Economic Calendar
Monday July 17 – Friday July 21

All sources from Commsec, Trading Economics, S&P Global Research, AMP, Westpac
MONDAY
Nope
TUESDAY
Australia RBA Meeting Minutes (Jul)

WEDNESDAY
Nope
THURSDAY
Australia Bureau of Stats Unemployment
Labour force (Jun)
Employment Participation rate
Unemployment rate (Jun)

FRIDAY
Nope

The Everyone Else Economic Calendar
Monday July 17 – Friday July 21

MONDAY
Japan Market Holiday
Singapore NODX (Jun)
South Korea Trade (Jun)
Indonesia Trade (Jun)
China (Mainland) GDP (Q2)
China (Mainland) Industrial Production (Jun)
China (Mainland) Retail Sales (Jun)
China (Mainland) Urban Fixed Asset Investment (Jun)

TUESDAY
Hong Kong SAR Unemployment Rate (Jun)
Canada Inflation (Jun)
United States Retail Sales (Jun)
United States Industrial Production (Jun)
United States Capacity Utilisation (Jun)
G20 Finance Ministers and Central Bank Governors Meeting

WEDNESDAY
Indonesia, Malaysia Market Holiday
New Zealand CPI Inflation (Q2)
United Kingdom CPI Inflation (Jun)
Eurozone CPI Inflation (Jun, final)
United Kingdom IPA Bellwether Report* (Q2)
United States Building Permits (Jun)
United States Housing Starts (Jun)
United States MBA Mortgage Rate
United States EIA Crude Oil Stocks Change

THURSDAY
Japan Trade (Jun)
China (Mainland) Loan Prime Rate (Jul)
Indonesia Retail Sales (May)
Malaysia Trade (Jun)
Germany PPI (Jun)
Eurozone Current Account (May)
Eurozone Consumer Confidence (Jul, flash)
Taiwan Export Orders (Jun)
Hong Kong SAR Inflation (Jun)
United States Initial Jobless Claims
United States Existing Home Sales (Jun)
United States Consumer Confidence Index (Jun)

FRIDAY
South Korea PPI (Jun)
Japan Inflation (Jun)
Hong Kong SAR Business Confidence (Q3)
United Kingdom Retail Sales (Jun)
Canada Retail Sales (May)
Canada Manufacturing Sales (Jun, prelim)

US Earnings

The US June quarter profit reporting season will start to ramp up with the consensus expecting a 7% fall in profits on a year ago. However, excluding energy and materials the consensus expectation is for a 1.4%yoy rise and hefty downwards revisions to earnings expectations along with strong beats so far from companies that report early including several banks point to a strong upside surprise.

Monday
Equity Lifestyle Properties (ELS)
Tuesday
Bank of America, Morgan Stanley, Charles Schwab, PNC Financial and PacWest
Wednesday
Tesla, Netflix
Thursday
American Airlines, Alaskan Airlines
Friday
American Express – earnings spotlight –
American Express (AXP, $174.24) the credit card company slated to report its second-quarter results ahead of Friday’s open.
Analysts expect AXP to report earnings of $2.81 per share (+9.3% YoY) on revenue of $15.5 billion (+15.5% YoY).