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Saxo Spotlight: What’s on investors and traders radars this week?

Macro 5 minutes to read
APAC Strategy Team

Summary:  The spotlight will be cast on US housing data, the RBA meeting minutes, as well as US corporate earnings releases; with IBM reporting ahead of big tech, and credit card giant American Express results on watch. In Australia, commodity giants report quarterly reports, which we think will show more pain is ahead for most businesses, except in energy. While the ECB is set to make its first-rate rate hike since 2011, but it will likely keep the Euro unenthused. The Bank of Japan meets which is not likely to the take the JPY out of its sharp downtrend, while the People's Bank of China also meets. Inflationary data will also be watched in UK, Japan and Canada. Buckle up.


What investors and traders are watching this week?

ECB Policy Meeting: Interest rate lift off

The European Central Bank (ECB) is expected to finally rise interest rates this Thursday, the first hike since 2011. We think this is too little, too late. The Eurozone CPI is out Tuesday, and consensus expects a of jump at 8.6% year-on-year. This is painful and a record high. We believe rate hikes will be rather limited though. New forecasts from the European Commission, suggest eurozone GDP is likely to rise 1.4% next year, down from May predictions of 2.3%. Still, we believe this is far too optimistic. We think GDP growth will be lower, around 1% in 2023. We think this will be reflected in the ECB’s projections towards the end of the year. Meaning, the ECB has about six months to rate hikes before a potential policy pivot towards a more dovish stance (on the condition that inflation is falling by then). And secondly, the market will also look closely at comments regarding the sharp depreciation of the euro against the US dollar. With investors now considering a 75 basis points (0.75%) hike by the US Federal Reserve this month, we don’t see any catalyst for upside for the euro in the short-term.

Bank of Japan Monetary Policy Meeting – another non event

The Bank of Japan (BOJ) is scheduled to meet July 20 to 21.  The market expects that the BOJ will keep its monetary policy unchanged.  Forex and bond traders will focus on the BOJ’s Outlook for Economic Activity and Prices Report to be released after the meeting for the central bank’s assessment of inflationary pressures. 

China’s Loan Prime Rates; tipped to stay on hold

The 1-year Loan Prime Rate (currently at 3.7%) and 5-year Loan Prime Rate (currently at 4.45%) are unlikely to be adjusted this Wednesday in China.  In a recent press conference, the People’s Bank of China said that “interest rates are low”. 

IBM Earnings, on watch. Can it continue to grow and outperform?

IBM (IBM) results will be watched closely on July 19 with many reflecting on their results for what to expect from big tech. Consensus expects 9.6% revenue growth in Q2, to $15.2 billion. At Saxo, we think a strong US dollar will have a much more pronounced affect on its results and see management downgrading full year results largely due to FX. We think European revenue growth will likely be slower than other regions, as European inflation is at an all-time high and expected to worsen. Bloomberg expects cloud related demand to remain robust, which will be reflected in what IBM define as ‘consulting’ and ‘software’, with 7.8% and 13.7% revenue growth expected. For traders, if results/its outlook is stronger than expected, the stock may trend higher. IBM shares are outperforming the market, trading up 3% YTD.

American Express (AXP) results on watch. Credit card spending outlook to dim

AmEx (AXP) reports will watched like hawk on July 22 July with many scouring for recessionary slow down spending clues. AmEx loan growth was 25% YOY in May, but we think slowing spending will have an impact on its bottom line, as credit card spending is sensitive to rising rates and inflation. Consensus expects credit card spending to rise 19% in 2022, with the consumer increasing travel and entertainment spending, and spending less on goods. We think the biggest risk to investors in credit card spending stocks, is slower earnings growth due to higher long term inflation, and accounting for bad debt provisions (write-offs). For traders, if results and its outlook is weaker than expected, the stock price will be pressured. American Express' stock is down 27% from February.

Commodity companies’ quarterly results: a sneak peek for what to expect for FY results

Major Australian commodities companies Q4 results will be watched this week; for clues as to what we can expect from Australian financial year results, out next month. BHP (BHP) reports quarterly numbers are due Tuesday July 19. Given Rio Tinto’s (RIO) quarterly results last week showed costs are moving higher and output is lower, while demand is lackluster, much of the same themes will be expected from BHP this week. Other results to watch include Lynas Corp (LYC) in rare earths and Allkem (AKE) in lithium. We think sell side analysts/investment banks may start to downgrade commodity stocks like these facing headwinds. Inversely, coal giant Whitehaven Coal’s (WHC) quarterly report will likely come with an upgrade amid tight coal supply; we think analysts will also upgrade FY forecast for coal companies. Finally, oil companies like Beach Energy (BPT), and Woodside (WDS), and Santos (STO) reporting Q4 on July 20th and 21st will be watched closely after the oil price has fallen about 20% in 5 weeks.


Key economic releases & central bank meetings this week

 

Monday Jul 18

  • New Zealand: Consumer Price Index (Q2)

Tuesday Jul 19

  • US: Housing Starts & Building Permits (Jun)
  • Australia: RBA Minutes (Jul)
  • Eurozone: HICP (Jun-Final)

Wednesday Jul 20

  • China: 1-year & 5-year loan prime rates
  • UK: CPI, CPI Core & RPI (Jun)

Thursday Jul 21

  • Japan: Bank of Japan Monetary Policy Meeting (end of 2-day meeting)
  • European Central Bank: ECB Policy Meeting
  • Korea: Exports & Imports (first 20 days of Jul)

Friday Jul 22

  • Eurozone: PMI Manufacturing & PMI Services (Jul-Preliminary)
  • Korea: PPI (Jun)

 

Key company earnings releases this week

 

Monday Jul 18

  • Goldman Sachs Group                    
  • Lynas Rare Earths
  • Whitehaven Coal
  • Lynas Rare Earths
  • Whitehaven Coal

Tuesday Jul 19

  • Johnson & Johnson             
  • Dow Inc
  • BHP Group
  • Ampol
  • HUB24          

Wednesday Jul 20

  • Northern Star Resources
  • Allkem
  • Atlas Arteria
  • Beach Energy
  • Megaport
  • Northern Star Resources
  • Allkem

Thursday Jul 21   

  • Travelers Cos
  • Woodside Energy Group
  • Newcrest Mining
  • Santos
  • Evolution Mining
  • Zip Co

Friday Jul 22                    

  • American Express               
  • Verizon Communications               
  • 3M Co           

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