Earnings season

US earnings season gets underway next week as the big banks begin reporting on Jan 14th. Weak corporate earnings growth could dent optimism around US stocks, but with the fourth quarter of 2019 out of the way, the market’s real focus is going to be whether we get the 10% earnings growth forecast in 2020.

Consensus estimates indicate a 1-2% decline in Q4 earnings, but the tendency to beat expectations suggests we will see earnings growth, albeit small.

Last year we saw multiple expansion massively outweigh earnings growth as the driver of the 28% rise in the S&P 500 last year. This poses problems as it means valuations are already rather stretched and reliant on strong EPS growth in 2020. However, ignoring the 2018 Christmas drubbing, the S&P 500 has only risen by a modest 10% from the 2018 highs.

US, China to sign phase one trade deal

Markets will surely take heart as January 15th approaches – that’s the deadline for signing the phase one trade deal the US and China managed agree in December. But there have been too many falls at the final hurdle to say that this is deal is done until the ink is dry. Markets could yet be in for a surprise, and even if phase one is agreed, we’ll then have to face the reality that phase two negotiations could be even more complex.

Germany, China growth data

World economic growth is expected to tick higher to 2.5% this year, but will German FY 2019 GDP and China Q4 growth figures shake the foundations of those predictions? Both have seen growth slow thanks to the US-China trade war, while Germany has also struggled due to Brexit uncertainty. The German economy is expected to have expanded 0.5% during 2019, while China’s Q4 reading is expected to tick higher to 6.1% from 6% in Q3.

US CPI – Fed to let inflation run hot

US inflation data is due for release on Tuesday 14th. Expectations are for price growth to moderate to 2% from 2.1%. The Federal Reserve in December made clear that it is prepared to let inflation run hot to compensate for months where it runs below target.

Corporate diary

Jan 14th – JPMorgan Chase & Co – Q4 
Jan 14th – Wells Fargo & Co – Q4 
Jan 14th – Citigroup – Q4 
Jan 14th – Markit – Q4 
Jan 15th – Bank of America – Q4 
Jan 15th – United Heatlh – Q4 
Jan 15th – BlackRock – Q4

Key Economic Events

(All times GMT)
09.30 GMT – Jan 13th – UK Monthly GDP / Production Data 
15.00 GMT – Jan 13th – CAD BOC Business Outlook Survey 
03.00 GMT – Jan 14th – China Trade Balance 
13.30 GMT – Jan 14th – US Inflation Data 
07.00 GMT – Jan 15th – Germany Full Year 2019 GDP Growth 
09.30 GMT – Jan 15th – UK Consumer Price Index 
15.30 GMT – Jan 15th – US EIA Crude Oil Inventories
Jan 15th – US-China Phase One Trade Deal Signing Ceremony 
12.30 GMT – Jan 16th – ECB Monetary Policy Meeting Accounts 
13.30 GMT – Jan 16th – US Retail Sales 
15.30 GMT – Jan 16th – US EIA Natural Gas Storage 
02.00 GMT – Jan 17th – China GDP 
09.30 GMT – Jan 17th – UK Retail Sales 
15.00 GMT – Jan 17th – US Preliminary University of Michigan Sentiment