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Week Ahead: FOMC minutes, Walmart earnings, next PMI round in focus
US discounters Walmart and Target, and home improvement retailers Home Depot and Lowe’s report their earnings this week. With the exception of Target, these stocks have dramatically outpaced the S&P 500 this year. The global monetary policy outlook also gets an update this week thanks to minutes from the FOMC, ECB, and RBA, while flash PMIs for August will help shape the Q3 growth outlook.
Earnings: Walmart, Target, Home Depot, Lowe’s
Discounters like Walmart and Target, and home improvement retailers Home Depot and Lowe’s have raced higher since the market bottomed-out in March. Walmart is 11% above 2020 opening levels, although that pales in comparison to Home Depot’s 28% surge and Lowe’s 30% rally. Target is the exception, although with year-to-date gains of 5% the stock is still fractionally outperforming the wider market.
According to Bank of America analysts, Target and Walmart could post strong earnings, thanks to broadened revenue streams, a timely shift to eCommerce, and shrinking expenses – with Q1 bearing the brunt of Covid-related costs.
Home Depot and Lowe’s have raced higher as investors bet on strong demand from consumers fed up of the homes they’ve been stuck inside for months. Both were able to stay open in Q1 while other businesses had to close, helping boost sales growth. Markets will be looking to see whether this moderated in Q2 as a whole as other firms opened their doors.
FOMC and RBA minutes, ECB accounts
We’ll get plenty of insight into the current state of mind of the world’s central bankers this week thanks to the latest meeting minutes from the Federal Open Market Committee, European Central Bank, and Reserve Bank of Australia.
The Fed, ECB, and RBA all left policy unchanged at their most recent meetings while reiterating their commitment to doing whatever it takes to keep the economy supported. The minutes will provide more information on their respective outlooks and how concerned policymakers are over second-wave risks.
Flash PMIs to help shape Q3 outlook
Now that the Q2 GDP data for the world’s major economies is in (in preliminary form at least), the focus can turn to the outlook for Q3. The next set of flash PMIs from Markit cover August, and will help to shape expectations of the pace of recovery this quarter.
The latest manufacturing, services, and composite numbers will be released for the Eurozone, UK, and US. July’s composite readings indicated economic activity in the Eurozone had expanded by the fastest pace in just over two years, while the UK expansion was the fastest since June 2015.
UK inflation, retail sales
Price growth in the UK came in slightly above forecast in June, rising from 0.5% to 0.6% on the year versus expectations of a slip to 0.4%. However, inflation is still running at a four-year low, and analysts do not believe June’s rise was the start of a sustained uptrend. Spare capacity in the economy is expected to keep a lid on price growth or see the rate slow even further.
Retail sales showed a larger-than-expected rise in June, jumping 13.9% on the month and following on from a 12.3% rebound in May. Despite the strength, many high street stores have announced jobs cuts recently. Data from the British Retail Consortium points to further sales growth in July, but with online still driving a huge portion of this the threat to the UK high street remains.
Highlights on XRay this Week
Read the full schedule of financial market analysis and training.
|07.15 UTC||Daily||European Morning Call|
|12.00 UTC||17-Aug||Master the Markets|
|From 15.30 UTC||18-Aug||Weekly Gold, Silver, and Oil Forecasts|
|17.00 UTC||19-Aug||Using candlestick charts to form the basis of your trading analysis|
|17.00 UTC||20-Aug||Election2020 Weekly|
Top Earnings Reports this Week
|22.30 GMT||17-Aug||BHP Billiton – Q4 2020|
|Pre-Market||18-Aug||Walmart – Q2 2021|
|Pre-Market||18-Aug||Home Depot – Q2 2020|
|Pre-Market||19-Aug||Lowe’s Companies – Q2 2020|
|Pre-Market||19-Aug||Target Corp – Q2 2020|
|After-Market||19-Aug||NVIDIA – Q2 2021|
|After-Market||20-Aug||Ross Stores – Q2 2020|
Key Events this Week
Watch out for the biggest events on the economic calendar this week:
|01.30 GMT||18-Aug||RBA Monetary Policy Meeting Minutes|
|06.00 GMT||19-Aug||UK Inflation|
|14.30 GMT||19-Aug||US EIA Crude Oil Inventories|
|18.00 GMT||19-Aug||US FOMC Meeting Minutes|
|11.30 GMT||20-Aug||ECB Monetary Policy Meeting Accounts|
|12.30 GMT||20-Aug||US Weekly Jobless Claims|
|14.30 GMT||20-Aug||US EIA Natural Gas Storage|
|06.00 GMT||21-Aug||UK Retail Sales|
|07.15 – 08.00 GMT||21-Aug||Eurozone Flash PMIs (Composite, Manufacturing, Services)|
|08.30 GMT||21-Aug||UK Flash PMIs (Composite, Manufacturing, Services)|
|12.30 GMT||21-Aug||Canada Core Retail Sales|
|13.45 GMT||21-Aug||US Flash Manufacturing PMI|
Week Ahead: Walmart and Home Depot Earnings, UK April Jobless Claims, May PMIs
We may be reaching the tail end of earnings season, but there are still some eagerly awaited releases lined up this week. Highlights will be reports from Walmart and Home Depot; stock in these companies has seen strong bid even as the wider market has tanked.
We also have the FOMC minutes, a host of PMIs, and jobless claims data from the UK for April. Here’s your full breakdown of the coming events you need to know about.
Japan Q1 GDP estimate
Preliminary Q1 GDP data for Japan is due early on Monday, but as with all Q1 growth data it will serve as the prelude to something much worse. The economy is expected to have contracted -1.2% on the quarter, after a -1.8% decline in the final three months of 2019. Annualised growth is expected to print at -4.6%, again a slowdown from the -7.1% drop recorded in 2019 Q4.
Forecasts for Q2 expect a 22% decline, the worst since the end of the Second World War. Will the Q1 figures give us any indication of how accurate those estimates might be, or will markets ignore the data and wait for more clarity?
How many UK jobs have been lost in lockdown?
The UK reports jobless claims data for April, when the workforce suffered an entire month of lockdown. The number of people filing jobless claims grew by over 12,000 in March: April’s figure is likely to print around 650,000. Unemployment rate figures are also scheduled, but these cover March and so are extremely backwards-looking by this point. A little later on Tuesday morning, the Labour Productivity Index for the first quarter is expected to print at -2.6%.
UK inflation set to collapse
April UK inflation data will feel the impact of collapsing retail sales, shuttered businesses, climbing unemployment and furloughed workers. Annualised price growth is expected to slump from 1.5% in May to 0.2% last month, with prices predicted to shrink -0.7% on the month after stagnating in April. The core inflation rate is predicted to drop to 1% on an annualised basis and -0.3% on the month. The contraction in producer prices is predicted to have accelerated to -3.9% on the year, and to have doubled to -0.4% on the month.
High hopes for Walmart, Home Depot earnings
Markets think Walmart and Home Depot are well-positioned to weather the coronavirus pandemic. Both stocks are over 4% higher year-to-date at the time of writing, compared to a -13% drop for the S&P 500. Walmart actually hit record highs at the end of April.
The Wall Street Journal recently reported that Walmart saw a 20% increase in sales during March alone. Markets clearly expect a lot from the leading retailers, but can Walmart and Home Depot deliver?
Both Walmart and Home Depot have “Strong Buy” ratings according to our Analyst Recommendations tool. Walmart has an average price target of $132.79 which represents a 7% upside on prices at the time of writing. Home Depot has a target price of $238.15, a 4% upside.
FOMC meeting minutes
We already know a lot more about the current thinking of the Federal Reserve thanks to last week’s speech from chair Jerome Powell. The minutes of the meeting at the end of April could be moot: Powell’s speech gave away what would likely have been the headlines from the minutes, namely that it was likely more stimulus would be necessary, but negative interest rates are not something being considered at this time.
Eurozone economic sentiment set to go negative again
April’s ZEW Economic Sentiment surveys for the Eurozone and Germany unexpectedly leapt back into positive territory. Assessment of current conditions remained dire, but investors began to focus on recovery.
But the reality of the recession that lies between where we are now and where we’re trying to get back to is expected to hit sentiment hard again this month, with the German reading forecast to plummet back to -14 and the Eurozone wide reading dropping to -10.
UK PMIs headed lower, Eurozone set to bounce off lows
This week we get the flash PMI readings for May. UK manufacturing is expected to drop to 26.6, while the services index will slip to 9. The overall composite PMI is expected to drop from 13.8 to 9.2.
Manufacturing and services in the Eurozone and its member states, however, are expected to rebound from their lows as economies began relaxing lockdown measures. Germany’s manufacturing index is predicted to jump around 10 points to 45, while services is forecast to more than double to 37 points. Overall the composite index is expected to climb from 17.4 to 40. The Eurozone composite is expected to rise from 13.6 to 34.
It’s worth remembering that these figures still represent a huge rate of contraction across all areas of the economy. The Eurozone economy may have bounced back from the initial shock of COVID-19, but there is still a long road ahead – and expectations for how long are getting bigger all the time.
Heads-Up on Earnings
The following companies are set to publish their quarterly earnings reports this week:
|18-May||Ryanair – FY 2020|
|Pre-Market||19-May||Walmart – Q1 2021|
|Pre-Market||19-May||Home Depot – Q1 2020|
|19-May||Imperial Brands – Q2 2020|
|Pre-Market||20-May||Lowe’s – Q1 2020|
|Pre-Market||20-May||Target Corp – Q1 2020|
|Pre-Market||20-May||Analog Devices – Q2 2020|
|20-May||Experian – FY 2020|
|Pre-Market||21-May||Medtronic – Q4 2020|
|Pre-Market||21-May||Best Buy – Q1 2021|
|After-Market||21-May||Intuit – Q3 2020|
|After-Market||21-May||Ross Stores – Q1 2020|
|After-Market||21-May||Agilent Technologies – Q2 2020|
|After-Market||21-May||Hewlett Packard Enterprise – Q2 2020|
|After-Market||21-May||NVIDIA – Q1 2021|
|22-May||Deere & Co – Q2 2020|
Highlights on XRay this Week
|17.00 UTC||18-May||Blonde Markets|
|18.00 UTC||18-May||The Ten Rules of Trading|
|15.30 UTC||19-May||Weekly Gold Forecast|
|18.00 UTC||19-May||Reading Candlestick Charts: Trading Patterns and Trends|
|11.00 UTC||20-May||Midweek Lunch Wrap|
Key Economic Events
Watch out for the biggest events on the economic calendar this week:
|23.50 UTC||17-May||Japan Preliminary Quarterly GDP|
|01.30 UTC||19-May||RBA Monetary Policy Meeting Minutes|
|06.00 UTC||19-May||UK Claimant Count Change / Unemployment Rate|
|09.00 UTC||19-May||Germany / Eurozone ZEW Economic Sentiment|
|06.00 UTC||20-May||UK Inflation|
|12.30 UTC||20-May||Canada Inflation|
|14.30 UTC||20-May||US EIA Crude Oil Inventories|
|18.00 UTC||20-May||FOMC Meeting Minutes|
|07.15 – 08.00 UTC||21-May||FR, DE, Eurozone Flash Services and Manufacturing PMIs|
|08.30 UTC||21-May||UK Flash Manufacturing and Services PMIs|
|12.30 UTC||21-May||US Jobless Claims|
|13.45 UTC||21-May||US Flash Manufacturing and Services PMIs|
|22.45 UTC||21-May||New Zealand Quarterly Retail Sales|
|06.00 UTC||22-May||UK Retail Sales|
|12.30 UTC||22-May||Canada Core Retail Sales|