Weekly Digest - INVESTEC
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Equity markets finished last week on a low note, with the S&P closing down 0.6% and Asia weak overnight (Hang Seng -1.4% and the Shanghai Composite -1.6%). Much of this is being attributed to comments by the New York Federal Reserve on Friday, in which it tried to dial down earlier comments from its President (on Thursday) that a 0.5% cut in interest rates was warranted; this initially led to the market pricing in a 72% chance of this outcome when the Fed meets next week, though subsequently this has fallen back.
There is plenty of news flow for investors to get their teeth into this week, with a raft of scheduled corporate Q2 news, significant macro data in the form of the ECB meeting, global manufacturing data and US Q2 GDP. Last but not least, today we have the announcement of the new Conservative party leader and Prime Minister.
Boris Johnson’s march to Downing Street looks almost certain to be confirmed. Chancellor Hammond’s predictable, if rather spectacular, announcement on the Andrew Marr show that he would resign if Boris is confirmed as the new leader is unlikely to be the last; the likes of Gauke and Stewart will likely follow suit. Sterling, despite briefly dipping below $1.24 last week, has not reacted significantly to the news and is a fraction below $1.25 at the time of writing.
On the corporate front, 15% of the S&P 500 have now reported second quarter results, with earnings around 4.9% ahead of consensus forecasts. Taking the results announced so far combined with the consensus for those yet to report, the market is expecting a 2.1% earnings contraction. This week’s highlights include UBS, Coca Cola, Visa, ITV, PayPal, LVMH, Compass, Diageo, Unilever, Amazon, Alphabet and Vodafone.
On the macro front, we have the European Central Bank monetary policy meeting on Thursday with little chance seen of a rate cut but, as ever, the nuance will be in the wording of the guidance.