Financial Markets – Top 5 Things To Watch This Week

This Tuesday will see Federal Reserve Chairman Jerome Powell testify to Congress on the economic stimulus measures put in place so far. A day later the minutes of the Fed’s April meeting are scheduled to be released.


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Investors will be looking at the weekly jobless claims data as the reopening of the economy gathers pace. Retail earnings will shine a light on consumer spending amid the coronavirus pandemic, while Tuesday brings the monthly expiration of U.S. West Texas Intermediate crude futures contract. Meanwhile, central banks in South Africa and Turkey are expected to cut interest rates again.

Here’s what you need to know to start your week.


Powell testimony, FOMC minutes
The Fed chairman is to testify on Tuesday before the Senate Banking Committee alongside Treasury Secretary Steven Mnuchin to update government officials on the economic stimulus programs approved so far.

In a speech last week Powell gave a sober assessment of the long-term risks to the U.S. economic outlook and the possible need for elected officials to approve more spending programs to keep the economy afloat.

On Wednesday, the Fed is to publish the minutes of it is April meeting. In its rate statement last month, the Fed said it will keep interest rates at near-zero until officials are “confident that the economy has weathered recent events.”


Economic data
In the U.S., the main datapoint continues to be the weekly report on initial jobless claims. With the reopening of the economy gaining momentum economists are hoping for a reading of below 2.5 million, which would indicate that the rate of layoffs is slowing somewhat.

There is a packed economic calendar in the U.K. this week, with updates on March employment, retail sales and inflation. Given that the lockdown in the U.K. didn’t start until late March it may be too early to see the impact of the pandemic on the employment figures.

The retail sales data for April could show at least a 15% decline in spending, while plunging oil prices are expected to have sent inflation tumbling last month.


Retail earnings
While the U.S. first-quarter earnings season is almost over the retail sector is just getting started. This week will see results from big U.S. retailers including Walmart (NYSE:WMT), Home Depot (NYSE:HD), Lowe’s (NYSE:LOW), Target (NYSE:TGT), Kohl’s (NYSE:KSS) and Best Buy (NYSE:BBY). Their figures will show whether U.S. consumers are still spending money despite the widespread coronavirus lockdowns.

The retailers are reporting in the shadow of online shopping giant Amazon (NASDAQ:AMZN), which is among the “stay-at-home” stocks benefiting from the lockdown. Its shares have soared some 28% this year.


Repeat performance of oil plunge?
The monthly expiration of U.S. West Texas Intermediate crude futures contract is coming up on Tuesday and many energy traders are worried about a repeat performance of the oil price slump last month which saw prices drop into negative territory for the first time ever.

Normally uneventful, the expiry turned dramatic in April as brimming storage tanks discouraged traders from taking delivery of oil.

The U.S. Commodities Futures Trading Commission has warned market participants they should be prepared for volatility and negative pricing again, with oil storage still tight and the demand outlook still severely depressed.

But oil prices have recently rebounded on hopes that the easing of lockdown restrictions will boost the energy demand outlook. In another hopeful sign, U.S. crude inventories fell in the most recent week for the first time since January.

Yet some traders seem to be heeding the CFTC’s warning. Volumes in the July futures contract, which expires in a month’s time, are outpacing the June contract by nearly 50%.


Emerging market rate cuts
Central banks in Turkey and South Africa are both to hold policy meetings on Thursday and both are expected to cut rates again despite heavy losses their currencies’ have recently endured.

Analyst polls predict South Africa will cut its 4.25% main rate by another 50 basis points. Economists stress any policy easing must be sizeable if it is to offer any help to the suffering economy.

Turkey’s meeting will be even more interesting. The lira has plunged to record lows, hard currency reserves are dwindling and inflation is in the double digits, yet all that probably won’t deter the central bank from chopping another 50-100 basis points off its 8.75% repo rate



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Financial Markets – Top 5 Things To Watch This Week

This week’s economic calendar is packed with data which will further demonstrate the extent to which the coronavirus pandemic has hit global growth. The U.S. is set to publish figures on retail sales and industrial production for April, while the UK and Germany are to release data on first quarter GDP.

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The data will fuel the debate on whether a rebound in the U.S. stock market is justified amid an unprecedented slowdown. Trade threats by U.S. President Donald Trump against China continue to be a source of worry for investors at a time when large swathes of the economy are at a near-standstill. Meanwhile, bitcoin is due to undergo the third halving in its 11-year history this week. Here’s what you need to know to start your week.


U.S. data to underline steep drop-off in economic activity
Data on U.S. retail sales and industrial production for April due on Friday will further highlight the effect of closures on sales and factory output. Economists are expecting retail sales to have tumbled 11.6%, surpassing the record drop of 8.4% in March. Industrial production, which slipped 5.4% in March, is forecast to fall 11.5%.

There will also be numbers related to consumer sentiment and inflation while Thursday’s weekly report on initial jobless claims will cover the eighth week since widespread lockdowns came into effect. Last Thursday’s report showed that claims topped 3 million for a seventh straight week, but were off the peaks of 6.8 million seen in the week ended March 28.

Investors will also be watching a speech on Wednesday by Federal Reserve Chairman Jerome Powell on current economic issues at a webinar organized by the Peterson Institute for International Economics.

Trump’s trade threats
U.S.- China trade tensions look set to continue to simmer after Trump told Fox News Channel on Friday that he was “very torn” about whether to end the Phase-1 trade deal with China.

Trump’s administration is weighing punitive actions against Beijing over its early handling of the coronavirus outbreak, including possible tariffs and shifting supply chains away from China.

Trump has said he would terminate the trade deal if China fails to meet its purchase commitments. He said on Wednesday that he would know within a week or two whether that was possible.

The deal, which calls for Beijing to boost its purchases of U.S. goods by $200 billion over two years, only took effect on Feb. 15 as the coronavirus pandemic was unfolding. Lockdowns aimed at stemming the spread of the virus dealt a sharp blow to the Chinese economy and it is just now starting to recover.



UK and German GDP to show initial virus impact
First quarter GDP numbers from the UK and Germany will give investors an initial sense of the economic fallout from the lockdowns which began in late March.

The UK economy is expected to contract 2.5%, but the full damage, taking in the second quarter, will be much worse. The Bank of England said last week it expects the UK economy to fall by 14% this year, its worst annual slump for more than 300 years, and the unemployment rate to reach 8% as the coronavirus crisis ravages the economy.

Meanwhile, the euro zone’s largest economy Germany is expected to shrink 2.1% in the three months to March and the government has said it expects an annual contraction of 6.3% this year, which would be the most since World War II.

Divide between U.S. stock market, economy to widen
Recent economic data pointing to historic drops in activity is concerning to investors who worry that unprecedented stimulus from the Federal Reserve and U.S. government have led markets to shrug off the economy’s massive slowdown.

The Labor Department reported Friday that the U.S. economy lost a staggering 20.5 million jobs that month, the steepest plunge since the Great Depression.

If economic data this week is worse than the already awful forecasts it could bolster the argument that the rally in stocks has gone too far. But it is too early to say whether it will derail a surge which saw stocks post their best monthly gain in three decades in April, despite weak economic data from the previous month.

Recent gains could fade if U.S. states need to unwind efforts to reopen their economies and unemployment fails to decline in coming months.

Bitcoin’s third ‘halving’
Investors are widely anticipating Tuesday’s bitcoin halving, the third in the digital currency’s 11-year history. The previous two bitcoin halvings propelled massive rallies in bitcoin’s market value, but there is a wildcard this time in the form of the coronavirus pandemic, some analysts said.



“From an efficient market perspective, any fundamental reaction to the halving should be heavily priced in at this point; after all, it’s hard to imagine a more predictable event than an unalterable supply reduction that has been scheduled for more than a decade in a liquid, heavily-traded … asset,” said Matt Weller, global head of market research at GAIN Capital.

Bitcoin’s technology was designed in such a way that it cuts the reward for miners in half every four years, a move meant to keep a lid on inflation.

In the run-up to this week’s halving, bitcoin had surged almost 40% since the beginning of the year and climbed more than 80% from its lows.



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Global Markets – Top 5 Things to Watch This Week

The week will start after Saturday’s data showing a record contraction in China’s manufacturing and service sectors because of the coronavirus outbreak, underlining the extent of the potential impact on the broader global economy.

Discover 7 Ways to Create a Sustainable, Passive Income for Life – By Robert Kiyosaki.

Investors will also be closely watching comments from Federal Reserve policymakers this week, with the prospects of a March rate cut on the rise. Friday’s U.S. jobs report is likely to be overshadowed by the market turmoil, but the race for the Democratic U.S. presidential nomination could divert some attention from the spread of the coronavirus. OPEC is to meet later in the week and with oil prices now down 25% so far this year pressure for additional output cuts is mounting. And the Bank of Canada may surprise investors with a rate cut at its meeting on Wednesday. Here’s what you need to know to start your week.




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1 – China PMI data to shock markets
Data on Saturday showed factory activity in China contracted at its fastest ever in February, even worse than during the global financial crisis of 2008. The shockingly weak data is likely to add to fears that the world’s second largest economy may not rebound as quickly as investors had initially hoped.

Another report on Sunday showing that South Korean exports snapped a 14-month losing streak in February masked disruptions from the coronavirus, reflected outside the headline figures.

The coming days will reveal whether the outbreak is accelerating in the United States, the world’s biggest economy, how much the U.S. government is prepared to deal with an epidemic, and the economic damage in other countries.

“Right now the market is saying that this is unbounded. We don’t know what the limits are and we don’t know where it’s going to peak,” said Graham Tanaka, chief investment officer at New York-based Tanaka Capital.

2 – The Fed and U.S. data
Surveys of U.S. manufacturing activity from Markit and the Institute of Supply Management on Monday will give investors a chance to assess the economic impact of the virus. Friday’s U.S. nonfarm payrolls report for February will be watched for indications on the strength of the labor market before coronavirus spread more widely. The consensus forecast points to non-farm payrolls gaining 175,000, slowing from 225,000 in January.

Several Fed speakers are due to make appearances this week, Including Cleveland Fed President Loretta Mester, St. Louis Fed chief James Bullard, Dallas Fed head Robert Kaplan, Minneapolis Fed President Neel Kashkari and New York Fed President John Williams.

The likelihood of a March rate cut by the Fed has risen in the past week with the U.S. economy looking increasingly vulnerable to the outbreak. Fed Chairman Jerome Powell said Friday that the U.S. central bank will “act as appropriate” as the virus poses “evolving risks” to the economy.

3 – Super Tuesday
Investors will be looking ahead to Tuesday, when 14 states will cast ballots as the race for the Democratic U.S. presidential nomination intensifies.

Market watchers are waiting to see whether progressive Senator Bernie Sanders consolidates his lead or if moderates such as former Vice President Joe Biden or former New York Mayor Michael Bloomberg can make inroads.

Sanders campaign promises to break up big banks, take on drug companies and essentially abolish private insurance in favor of a single government-run plan have rattled some investors.

Shares of health insurers such as UnitedHealth Group (NYSE:UNH) and Centene Corp. (NYSE:CNC) have sold off in recent months amid growing concerns over the potential nomination of Sanders or fellow candidate Elizabeth Warren.

While investors have been more focused on coronavirus developments, some analysts have said Sanders’ rise in the polls also contributed to the recent sell-off. Some investors also noted that continued volatility in markets or an economic downturn could erode support for U.S. President Donald Trump.

Discover 7 Ways to Create a Sustainable, Passive Income for Life – By Robert Kiyosaki.

4 – Bank of Canada to make preemptive rate cut?
The Bank of Canada is to hold its latest policy setting meeting on Wednesday, the second to last such meeting before Stephen Poloz steps down as Governor.

Heightened financial market volatility amid fears over the coronavirus outbreak mean that the odds of a rate cut are rising, despite a strong domestic jobs market and inflation that is running roughly in line with the bank’s target.

Growing concern about the economic impact of protests opposing the Coastal GasLink pipeline that have severely affected the country’s rail network have also fed into expectations for a rate cut.

“The BoC has a reputation for moving early and occasionally providing surprises and we certainly think they could choose to pre-emptively cut this coming week. After all, they have much more room to offer support than most other developed markets, given their policy rate,” analysts at ING wrote.

5 – OPEC facing challenge of slumping demand outlook
The Organization of the Petroleum Exporting Countries and its allies including Russia – known as OPEC+ – meet in Vienna on Thursday and Friday as the spread of coronavirus around the world stokes fears that a slowing global economy will hit energy demand.

Friday saw the lowest closes for both Brent and WTI since December 2018. For the week, Brent lost almost 14%, its biggest weekly percentage decline since January 2016, while WTI fell over 16% in its biggest weekly percentage drop since December 2008.

“OPEC+ will have to deliver a deeper production cut as oil prices remain in freefall,” Edward Moya, senior market analyst at OANDA in New York, said in a report.

The group has already slashed oil output by 1.7 million bpd under a deal that runs to the end of March. In an initial response to counter the hit of the virus, an OPEC+ committee has recommended deepening output cuts by 600,000 bpd, but that figure is now seen as not enough by some in the group.




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Discover 7 Ways to Create a Sustainable, Passive Income for Life – By Robert Kiyosaki.



Financial Markets – Top 5 Things to Watch This Week

Stock Market NewsFinancial markets in mainland China are set to reopen on Monday, after the holiday for the Lunar New Year was extended by the government amid the Coronavirus outbreak. Investors will continue to monitor the global economic fallout from the virus’s progression, which has largely overshadowed earnings season so far. Disney , Alphabet and Twitter are among the biggest names to report this week, while the economic calendar features the first U.S. jobs report for 2020. Meanwhile, the Reserve Bank of Australia might deliver a surprise rate cut. Here’s what you need to know to start your week.

China to play catch-up to global market selloff
Financial markets in the Chinese mainland are set to reopen on Monday, with investors bracing for a volatile session playing catch-up to global markets, which have sold off sharply amid concerns over the economic repercussions of the outbreak. The country’s central bank is gearing up for more stimulus measures on Monday to boost liquidity and support companies affected by the virus, which has so far claimed 305 lives, all but one in China.

Efforts to contain the spread of the virus have caused major disruptions and look set to deal a major blow to growth in China and globally. It comes after last year’s trade war between Washington and Beijing knocked China’s GDP down to 6% in 2019 and acted as a drag on global growth, which slowed to 3% last year from 3.6% in 2018.

Global economic impact of virus
China’s central role in the in the global supply chain means that the ripple effects from the virus are being felt far and wide and countries that are heavily dependent on Chinese demand have seen steep drops in their currencies. The Australian dollar ended down around 5% in January, its worst month since 2016.

Global stocks have tumbled, with Wall Street’s major indexes dropping more than 1.5% on Friday, sealing their worst week in six months.

Economists fear the coronavirus could have a bigger impact than Severe Acute Respiratory Syndrome (SARS), which killed about 800 people between 2002 and 2003 at an estimated cost of $33 billion to the global economy, since China’s share of the world economy is now far greater.

Oil prices capped off their worst monthly loss in more than a year on Friday, while safe haven play gold notched up its best month in five.

Earnings season nears halfway mark
Almost 100 companies traded on the S&P 500 are due to report earnings this week, which means that approximately two-thirds of the index will have reported by Friday, while two Dow components, Disney (NYSE:DIS) and Merck (NYSE:MRK), are on the slate.

Disney’s fourth quarter earnings report, due after the close on Tuesday, will include the first official subscriber figures for its Disney+ streaming service which launched halfway through the quarter. Investors will also be on the alert for any indications of the impact of the coronavirus outbreak on theme-park attendance after Shanghai Disneyland was indefinitely shut down late last month.

Meanwhile, Google parent Alphabet (NASDAQ:GOOGL) will report on Monday, Snap (NYSE:SNAP) is due to report numbers on Tuesday while Uber (NYSE:UBER) and Twitter (NYSE:TWTR) follow on Thursday.

U.S. jobs report likely to play second fiddle to virus fears
Friday’s U.S. nonfarm payrolls report for January is forecast to show jobs growth of 161,000, while wage growth is expected to tick up to 3% after slipping back to 2.9% in December. Any signs of sluggish wage growth could foreshadow weakness in consumer spending.

Monday’s ISM manufacturing index is expected to see a small uptick from better regional data in the wake of the phase 1 trade deal between the U.S. and China. Several Federal Reserve officials are due to deliver remarks this week after keeping rates on hold at their January meeting and U.S. President Donald Trump is set to make his State of the Union speech on Tuesday.

In the euro zone, retail sales numbers for December are due on Wednesday, while European Central Bank President Christine Lagarde is to testify on the economic outlook before European lawmakers on Thursday.

RBA to cut rates?
The RBA is due to announce its latest policy decision on Tuesday and the bushfire emergency along with the threat to the economic outlook from the Coronavirus (and its impact on China) mean that a 25 basis point rate cut could be on the cards, despite a recent welcome dip in the country’s unemployment rate.

Even if policymakers hold off on cutting rates for now a more dovish sounding rate statement could indicate that a cut is imminent.

Australian inflation edged higher in the final quarter of 2019 but remained below the RBA’s 2-3% target band. Persistent weakness in inflation was one reason the RBA cut interest rates three times last year to an all-time low of 1.75%.





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How To Start Investing In 2020


StockMarketNews.Today — Over half of Americans (55%) say they are not participating in the stock market, according to a 2019 poll of over 8,000 U.S. adults conducted by MetLife. Gen Z (18 to 24) and millennials (defined here those 25 to 34) are opting out in far greater numbers than older Americans.

For many, it comes down to fear. “There are so many choices today — it’s definitely overwhelming for people,” says David Day, a certified financial planner with Colorado-based Gold Medal Waters. “When you have too many choices and there are too many options, you end up just getting paralyzed and doing nothing.”

But experts say even if the stock market conditions aren’t perfect, it’s worth investing, be it in a retirement account or a taxable brokerage account. Don’t waste time trying to get into the market at the perfect time, says Ron Guay, a financial planner with California-based Rivermark Wealth Management.

“The best time to invest in the market is when you have the money to do so. Holding money on the sidelines in anticipation of a market dip is a loser’s game,” he says.

Here’s how financial planners recommend first-time investors get started today.

Understand what you’re willing to risk
It sounds easy to determine if you’re a conservative or aggressive investor, but it can be a bit more nuanced — especially if you haven’t invested much in the past, or have only contributed to a target date fund within a retirement account, such as a 401(k). In those instances, you may not have had to consider risk because the fund was based on your potential retirement date and allocated accordingly.

It’s a little different when you’re the one picking the funds or finding a portfolio in an individual retirement account or a taxable brokerage account that works for you. The last decade has brought a charging bull market that doesn’t seem to be losing steam. That environment of an economically sound market that consistently delivers good returns may have created unrealistic expectations among young people that markets will never go down and that investing isn’t that risky.

Take a moment to consider what you’d be willing to risk if the market experienced a sustained downturn and you lost part of your investment. If you’re not sure, there are quizzes you can take, such as the Investment Risk Tolerance Assessment created by personal financial planning professors, Dr. Ruth Lytton at Virginia Tech and Dr. John Grable at the University of Georgia.

Online investment tools can make it easier
If you’re looking for a fairly easy way to get started investing, Guay frequently suggests first-time investors open a managed account with an online investment advice service (also called a robo-advisor) like Betterment.

They do a nice job of first focusing the investor on their goal, such as building an emergency fund — a key component to financial health — or investing savings for a down payment for a first home or other large purchase, Guay says. “Many times investors want to jump right in and start buying stocks without even determining what the eventual use of the funds will be,” he says. Having a clear goal for the money will dictate how and where you invest.

Several robo-advisors, including Betterment and investing apps like Stockpile and Stash, offer fractional share investing, which allows investors to buy a portion of a stock or ETF instead of a whole unit. This makes it easier for investors with only a limited amount of money to put everything into the market, says Ryan Firth, a CFP with Texas-based Mercer Street.

Many of these platforms also make it easy to make regular contributions to your retirement accounts part of your routine, such as putting $100 aside every two weeks, a strategy that experts call dollar-cost averaging.

This is good for investors with a long time horizon and a goal like saving for retirement because it takes emotion out of the equation. Instead, you’re continually investing, week after week, no matter what the market is doing. Plus, it keeps you from selling out during market lows and buying in at market highs.

If going the DIY route: Find diversified, low-cost funds
Of course, you can invest on your own by simply signing up for an account, like a Roth IRA or a taxable brokerage account, with a brokerage such as Fidelity or Charles Schwab.

If you’re a first-time investor investing on your own, keep it as simple as possible, recommends John Crumrine, a CFP with North Carolina-based Brunswick Financial. “The easiest way to do that while still having a diversified portfolio is to invest in the broadest index funds you can find,” he says

It’s reasonable for an investor in their 20s or 30s to invest a majority, or even all of the money, in their Roth IRA in stocks because they have a longer time to recover from any potential losses. But instead of picking individual stocks, experts say to look for a total stock market exchange-traded fund (ETF) or index fund, which is a type of mutual fund. Crumrine says something like the Fidelity Total Market Index Fund (FSKAX) or the Schwab Total Stock Market Index Fund (SWTSX), both of which cover virtually the entire U.S. stock market, would be a good start. The Vanguard Total Stock Market ETF (VTI) is a similarly broad stock ETF option.

You could also look for a blend index fund, whether for a Roth IRA or a brokerage account. These types of funds contain a variety of stocks and sometimes bonds, to create a diversified investment option, says Sara Behr, a CFP and founder of California-based Simplify Financial Planning. The Vanguard Balanced Index Fund (VBINX), which has roughly 60% in stocks and 40% in bonds by tracking two indexes, is a good example of this type of blend fund.

When investing, you want to create a balanced, diversified portfolio, which means that you have your money invested in different types of assets, such as stocks and bonds. You want to set up your investments in a way that when one sector of the market is dipping, you are also invested somewhere that is performing well. To do that, you may need to invest in more than one fund.

That said, don’t get so hung up on finding that perfect fund that you don’t invest at all. “Getting invested is way more important than the difference between Fund A and Fund B,” Day says.

Keep an eye on fees
Whether you’re using a robo-advisor or investing via a brokerage, you need to understand what you’re paying for your investments. Over a third of U.S. investors think that they don’t pay any fees, a 2018 survey found. But it turns out, a vast majority do — and those fees can add up. In some cases, they’ve been found to eat away at your investment returns.

Robo-advisors offer a lot of helpful tools and easy-to-follow formats. But you are paying a bit more, usually between 0.25% and 1% of your assets, for the service’s help setting up and managing your money. That’s on top of the cost of the fund, typically referred to as the expense ratio.

By doing it yourself, you’ll avoid those management fees, but you will still have to pay the expense ratio. The average ratio across all mutual funds, including index funds, was about 0.48% in 2018, according to Morningstar. ETFs, on the other hand, carry lower average expense ratios of 0.44%. That means if you invest $1,000 into an ETF, you’ll likely pay about $4.40 in annual fees.

Most funds, and even some investment services, have minimum initial investment amounts ranging from $100 to $3,000, although you can find some with no minimum, Crumrine says. If you don’t have enough to hit the minimum and start investing right away, he says you can set up the automatic money transfers to the account until you have built up enough to meet the requirement.

Temper your expectations
“Patience is an important lesson to learn for young investors. They want to see quick results,” says Randy Gardner, an adjunct professor of financial planning at the American College of Financial Services and financial coach with the Garrett Planning Network of financial planners.

Everyone expects to have the next Microsoft or Apple or Google, Gardner says, and while there are stocks with big gains and years that the market does very well (including last year, with the S&P 500 rising 28.9%), the stock market returns a historical average of about 10%.

“We’ve been trained to expect big returns, and if we don’t get them, then we’re disappointed,” Gardner says. “A lot of people lose confidence in the markets because they don’t give the returns as quickly as people hoped.”

And don’t forget to reinvest the returns you do get, Crumrine says. “Reinvestment is one of the keys to growing your balances over time,” he says. When first purchasing a mutual fund, as part of the order entry, the investor will have an option to automatically reinvest dividends and capital gains. This option should always be selected, he adds.


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Stock Market: Economic Calendar – Top 5 Things to Watch This Week

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Stock Market — Here’s what you need to know to start your week.


Coronavirus outbreak
Market participants are keeping a wary eye on developments surrounding the coronavirus outbreak which has infected more than 2,000 people, the vast majority in China where 56 people have died. The virus has also spread to the U.S., Thailand, South Korea, Japan, Australia, France and Canada.

With stocks close to all-time highs investors are fearful that the newly identified virus could develop into something worse, like the 2003 SARS epidemic.

“Markets hate uncertainty and the virus has been enough to inject uncertainty in the markets,” said David Carter, chief investment officer at Lenox Wealth Advisors in New York.

The World Health Organization has stopped short of calling the outbreak a global health emergency, but some health experts question whether China can continue to contain the epidemic.

More FAANG results
While last week’s Q4 earnings from Netflix (NASDAQ:NFLX) underwhelmed Wall Street, analyst hopes are still high for the other FAANGs – Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN) and Google parent Alphabet (NASDAQ:GOOGL) – ahead of their financial results for the quarter.

The FAANG group of U.S. tech stocks have been the biggest drivers of the bull market, with recent gains among most of the group far outstripping the broader market.

Facebook is expected to post earnings growth of 6.2% when it reports on Wednesday, while Apple earnings, due a day earlier, are forecast to have grown 8.7%. Amazon has warned that increased investment in its package delivery business in the last quarter will weigh on earnings, but it sees quarterly revenues up 18.7% when it reports on Thursday.

In comparison, the S&P 500’s fourth-quarter earnings are expected to decline 0.8% and revenue is seen rising 4.4%, according the latest estimates compiled by Refinitiv.

Fed meeting
The Fed will almost certainly keep monetary policy on hold on Wednesday as policymakers continue to assess how the three rate cuts from 2019 are percolating through the economy.

“With no new forecasts being released at this meeting it will be the tone of Jerome Powell’s press conference and the actual vote that is likely to be of most interest for markets,” said James Knightley, chief international economist at ING.

“We would also expect to hear Jerome Powell retaining his cautiously upbeat language, particularly given the positive conclusion to U.S.-China trade talks. He is likely to reiterate that we will need to see a “material change” for the Fed to consider a policy shift.”

Bank of England meeting
The BoE is to deliver its final monetary policy decision before Britain exits the EU on Jan 31 on Thursday and the meeting will be Mark Carney’s last as central bank governor.

The question is whether the BoE will join central bank peers in cutting interest rates. Economic growth and inflation took a hit from three-and-a-half years of Brexit uncertainty so a recent string of dismal data and comments by BoE officials, including Carney, that more economic stimulus might be needed saw rate cut expectations surge.

But economic data last week pointed to a post-election boost, leading markets to pare back expectations for a cut.

The future path of the British pound, currently trading at around $1.31, in the middle of its trading range so far in 2020 – hangs on the BoE’s decision and forecasts for whether the economy will find more momentum after Brexit.

GDP figures
The U.S. is to release advance fourth quarter GDP figures on Thursday, with analysts forecasting growth of 2.1%. U.S. President Donald Trump might repeat his argument that if it were not for Fed policy tightening, growth would be closer to 4%.

The Euro Zone is to release GDP data on Friday, which is forecast to show the economy expanded 0.2% from the previous three months, backing up the European Central Bank’s view of “ongoing, but moderate growth.”




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Stock Market: This May Be The Most Important Week So Far In 2020



Stock Market — The week ahead is arguably the most important here at the start of 2020. The Federal Reserve and the Bank of England meet. The U.S. and the eurozone report initial estimates of Q4 19 GDP. The eurozone also reports its preliminary estimate of January CPI. China returns from the extended Lunar New Year celebration and reports its official PMI. Japan will report December retail sales and industrial production. These data points will provide insight into the state of the recovery from the October sales tax and typhoon.

Fears of the spread of a new virus from China and the potential economic impact weighed on risk-taking appetites last week. It is still early days, but the contagion rate appears to be tracking something close to SARS, which ended up slashing Chinese growth by two percentage points. China and Hong Kong equity markets were hit the hardest (3%+), the S&P 500’s decline of a little more than 1%, was only the fourth weekly loss but the largest since the end of Q3 ’19.

China reports the newest PMI readings on January 30. The impact of the coronavirus may not be picked up entirely in the data, which will not offer a clean read on the economy due to the Lunar New Year. To the extent that the virus impact is detected, it will likely hit services harder that manufactured goods in the first instance. That said, January manufacturing and non-manufacturing PMI are expected to have softened a little (50.2 and 53.5, respectively in December). The risk is that the economic disruption will offset the stimulus recently provided. The magnitude of the commitment to buy U.S. goods was already a stretch, according to some estimates, and weaker Chinese growth could provide another hurdle.

It has been widely reported that China committed to buying $200 bln more U.S. goods than the $128 bln purchased in 2017, the last year before the tariffs. However, last year, the U.S. exports to China were about $98 bln. So, compared with 2019, China has committed to buying $230 bln more U.S. goods. China will likely import a bit more than $2 trillion of goods and services this year. The political agreement appears to secure for the U.S. a little more than 15% of that market.

With a press conference after every FOMC meeting, and given Powell’s perceived communication challenges, it is difficult to say that the January 29 meeting is a non-event. Still, for all practical purposes, it is. There is scope for a small technical adjustment. The Fed pays 1.55% interest on both required and excess reserves. It could raise this by five basis points to ensure the fed funds rate remains within the 1.50%-1.75% target range. Many who think the Fed’s bill buying and repo operations represent an easing of monetary policy (as in QE), may argue that the Fed is tightening. However, most will likely conclude that it would be a technical adjustment and not a change in monetary policy proper.

The forecasts will not be updated until March, and the economy has not materially deviated from Fed expectations. Last year, some media reports played up the two persistent dissents against the series of rate cuts and argued Powell was losing control. However, this does not seem to be the case, and indeed a clear consensus has emerged. At the December meeting, 14 of the 17 officials thought no rate change would be needed this year.

Near-term downside risks have lessened. The U.S.-China trade deal may not deserve the embellished official descriptions, but an escalation in the coming months seems less likely than even a couple of months ago. The UK will leave the EU at the end of January for an 11-month standstill arrangement where nothing changes while a new trade deal is negotiated. The risk of a disruptive no-deal exit at the end of the year remains, but it is not yet pressing. Nevertheless, the implied yield of the December 2020 fed funds futures contract is near 1.30% compared with the current average of 1.55%, suggesting a 25 bp Fed cut has been discounted.

The Bank of England is a different story. Two members of the Monetary Policy Committee have dissented at the past couple of meetings in favor of an immediate rate cut. Two other members have indicated if the data did not improve, they too could support a rate reduction. BOE Governor Carney also sounded more dovish in recent comments. The January 30 BOE meeting will be the last Carney chairs. Andrew Baily will take the reins before the next meeting on March 26.

The official comments and the disappointing economic data has spurred a shift in market expectations. On January 10, the derivatives market implied a little less than a one-in-four chance of a rate cut on January 30. By January 17, the odds jumped to almost three-in-four. But sentiment swung back last week, and the odds narrowed to a little less than 50/50. It is a close call, and on balance, the resilience of the labor market, the recovery in business confidence, and the uptick in the PMI may keep the BOE on hold a bit longer. If this is indeed the case, sterling may pop higher, though ideas that lower rates can still be delivered later in H1 may limit the upside.

Quarterly GDP numbers often grab the headline, but for many investors, the report is a culmination of other high-frequency data with some variance. Moreover, GDP data is backward-looking. It is then more a favorite of economists than market participants. That said, the mixed signals of the U.S. economy make this GDP call particularly tricky, and the first estimate is subject to statistically significant revisions, often stemming from trade and inventories. The NY Fed’s GDP tracker (as of January 17) pointed to a sub-par 1.2% annualized pace. The Atlanta Fed’s model pointed to a 1.8% pace. The Bloomberg survey has a median forecast of 2.1%.

The composition of U.S. growth may have also changed. Consumption may have slowed from the 3.2% annualized pace in Q3. Residential investment appears to have risen, and trade also may have made a net positive contribution. The headline and core deflator are likely to be mostly steady. The Federal Reserve will look through just about any weakness in Q4 GDP and will make allowances for the production cuts at Boeing Co (NYSE:BA) in Q1 20. The case of a rate cut is based on ideas that record-long U.S. expansion is fragile and will have increasing difficulty coping with shocks. The lack of pick-up in early Q2 will leave the Fed with the same choice as last year. With price pressures subdued, another insurance policy can be taken out to boost the chances that the expansion can be extended.

Eurozone Q4 GDP seems easier to forecast. Growth has been relatively steady, with quarterly growth averaging about 0.3% for the past four quarters and 0.2% for the previous two. The year-over-year pace has been about 1.2% over the same period. It may not be very inspiring, but it is steady, and growth potential is probably only a little higher at around 1.5% or so. Market participants appear to be more confident that the ECB is on hold for the duration that it is of the Fed. The market sees only about a one-in-five chance of a rate cut by the ECB this year.

Perhaps the most challenging data point for investors to make sense of will be the initial estimate of the eurozone’s January consumer inflation. Prices fall in January. Last January, prices fell by 1%. That means that if prices fell by 0.9% this month, as economists forecast, the year-over-year rate will tick up. Indeed, the year-over-year rate is expected to rise to 1.4%. It would be the highest since last April. This is one reason why claims of Japanification of Europe are too simplistic: European inflation is nearly twice that of Japan’s. However, while we anticipate a base-effect rise in European CPI, the comparisons are not as friendly, and the true signal, as likely to be reflected in the core rate that may ease to 1.2% after being stuck at 1.3% in November and December.

Lastly, we turn to Japan. The issue at hand is how quickly it can rebound from the controversial sales tax increase and the typhoons. The most direct report will be retail sales. Recall the sequence of events. Anticipating the tax increase in October, consumers brought forward purchases, and August retail sales rose by 4.6% and then 7.2%, before plummeting 14.2% in October. They snapped back 4.5% in November and probably a little more than 1% in December.

Industrial output fell by 4.5% in October and another 1% in November. A small rise of around 0.7% is expected in December. Yet, in terms of the yen, these macro considerations seem to be of secondary importance. The heightened anxiety over the new coronavirus expressed through the sale of risk-off assets, and the unwinding of carry-trades and those speculators knowingly or unknowingly riding this wave is the primary driver now as the dollar’s advance was stalling around JPY110.25.

The coronavirus is an economic and financial shock. The extent of that shock still needs to be assessed but it could provide the spark for an arguably long-overdue adjustment in the capital markets. Investors may be risk-averse until there is greater transparency about the contagion rate and health risks. It is humbling to appreciate that despite the advances in science and medicine, some 80k Americans died in 2017-2018 from influenza, the highest toll in 40 years. The World Health Organization estimates that the annual flu epidemic kills between around 250k-500k people globally each year.



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Financial Markets: Top 5 Things to Know in the Market on Thursday

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Here’s what you need to know in financial markets on Thursday, 10th October.

1. Trade talks resume

Top-level trade negotiations between China and the U.S. are due to resume in Washington after a two-month hiatus. With both sides having ramped up the pressure earlier this week with measures against the NBA on the one side and Chinese makers of surveillance equipment on the other, the chance of a comprehensive rapprochement is close to zero, meaning that the next two days will principally be an exercise in damage limitation.


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Background briefings from both sides have created a confusing backdrop, with Bloomberg talking up the chance of an interim deal that could lead to a scheduled increase in U.S. tariffs being pushed back again. However, the South China Morning Post and Fox have both played down the chance of agreement, citing officials as saying that the talks may be broken off after one day.

2. Turkey ground troops enter Syria

Turkey sent its ground troops into northern Syria to establish a 20-mile buffer zone along its southern border, from which it hopes to drive out Kurdish militia who were instrumental in defeating ISIS and who now hold a large number of ISIS fighters in prison.


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It then intends to resettle some of the Syrian refugees currently in Turkey in the safe zone. Turkey has accepted over 3.5 million refugees from Syria since the start of the latter’s civil war.

Turkish airstrikes which began on Thursday are reported to have inflicted numerous civilian casualties. Kurdish forces have responded by shelling points in Turkey. The Turkish lira fell to a four-month low against the dollar.

3. Stocks set to open flat

U.S. stock markets are set to open flat ahead of the trade talks with China, with few willing to bet heavily on an outcome one way or the other. By 6:15 AM ET, Dow futures were up 3 points, effectively unchanged. S&P 500 Futures and Nasdaq 100 Futures were up less than 0.1%.

On the earnings front, Delta Air Lines (NYSE:DAL) will report its third-quarter figures. Boeing (NYSE:BA) will also be in focus after reports that cracks had been found in the wings of some of its older planes.

Earlier Thursday, Dutch medical goods maker Koninklijke Philips (AS:PHG) warned that its third-quarter profit margins would be badly hit by the impact of U.S. tariffs on the equipment that it makes in China, a pattern that may affect many more companies in the forthcoming earnings season.

4. CPI, Jobless claims due as Europe weakens further

The market can update its outlook for further rate cuts from the Federal Reserve at 8:30 AM ET (12:30 GMT), when consumer inflation figures for September are announced, along with the latest weekly jobless claims numbers. The consensus forecast is for the annual inflation rate to rise to 1.8%.

In a speech late on Wednesday, Fed Chairman Jerome Powell highlighted the risks to the global economy from the current uncertainties over U.S.-China trade and Brexit.

News out of Europe this morning won’t have cheered him up much: industrial production in France fell by a sharper-than-expected 0.9%, and German exports also weakened further, although the U.K. economy appeared on course to avoid recession in the third quarter, as GDP rose 0.3% in the three months through August.

5. OPEC to update on oil market

The oil market also gets a regular reality check at 7 AM ET (11:00 GMT) with the publication of OPEC’s monthly report.


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The cartel’s latest estimates for global supply and demand will come a day after the U.S. government said U.S. crude output hit a record high of 12.6 million barrels a day last month. By 6:15 AM ET, WTI Futures, the U.S. benchmark, were down 0.4% at $52.36 a barrel, while international benchmark Brent was down 0.5% at $58.02.




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Financial Markets News: Top 5 Things to Watch This Week

Stock Market Today – Business & Financial News ◊ … — Upcoming appearances by Federal Reserve policymakers in the coming days will be even more closely watched by investors than usual in the wake of its second rate cut this year. In addition, investors will be focusing their attention on economic data for fresh indications on the outlook for monetary policy. Brexit and trade tensions will also be occupying the attention of market participants. Here’s what you need to know to start your week.


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1 – Central Bank Speakers

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Investors will get to hear from a number of Fed officials this week, including New York Fed President John Williams, St Louis Fed President James Bullard and Chicago Fed President Charles Evans.

The main focus will likely be on Bullard, who was the lone dissenter in favor of a 50 basis point rate cut at last week’s Fed meeting, when it delivered a 25 basis point cut. Two other policymakers voted in favor of no rate cut at all.

After the U.S. Fed’s second rate cut of 2019, the bank’s latest dot plot indicates no more cuts this year. The shift has come as a shock given expectations prior to the Fed meeting were for several more cuts to contain economic fallout from the U.S.-China trade war. Investors will be on the lookout for any fresh indications on whether rates could move again this year.

Meanwhile, European Central Bank President Mario Draghi will make a final appearance in the European Parliament on Monday ahead of his imminent departure.


2 – Durable Goods Orders

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Upcoming durable goods data will help give investors fresh insights in the possible outlook for U.S. monetary policy.

August durable goods orders will shed light on whether the trade war is eroding business investment. Orders for goods such as airplanes and toasters are seen having fallen 1% after rising 2% in July. Of keen interest will be orders for non-defense capital goods, excluding aircraft — a closely watched proxy for business spending plans that increased 0.4% last month, even as shipments posted the biggest drop since October 2016. Core capital goods shipments are used to calculate GDP.

The calendar also features a final reading on second quarter GDP, personal income and spending and a look at consumer confidence.


3 – Trade Tensions

Hopes for a breakthrough in the U.S. – China trade war receded further on Friday after Chinese officials unexpectedly canceled a visit to farms in Montana and Nebraska as deputy trade negotiators wrapped up two days of negotiations in Washington.


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Before the talks started, some reports had suggested that an interim deal was being considered, involving Chinese purchases of U.S. farm goods, some improvements in Chinese market access and an easing of U.S. sanctions on Huawei .

But U.S. President Donald Trump made clear on Friday that purchases would not be enough for him to end his punitive tariffs. “We’re looking for a complete deal. I’m not looking for a partial deal,” he told reporters, adding that he did not need a deal to happen before the 2020 presidential election.


4 – Brexit

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Britain’s Supreme Court is expected to make a ruling in the coming days on whether Prime Minister Boris Johnson acted unlawfully in suspending parliament. A decision against Johnson may force him to recall lawmakers, giving them more time to challenge his plan to take Britain out of the European Union on Oct. 31 — with or without a divorce deal.

Markets will also be focusing on whether Johnson can make a revised Bexit deal with the EU, though this still seems unlikely. Recent comments by EU Commission President Jean-Claude Juncker stirred hopes of a Brexit deal, sending the pound to its highest level since July and putting it on track for its best month this year.


5 – PMI watch

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While the Fed has been talking up the state of the U.S. economy, European Central Bank chief Mario Draghi has urged euro zone governments to step up spending if they want to see economic growth speeding up.

Given that background and the Fed’s promise to be “highly data-dependent” while setting interest rates, Monday’s flash Purchasing Managers’ Index (PMI) readings are likely to be closely scrutinized — a strong number would tip the balance in favor of the hawks on the Fed board.


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The ECB on the other hand has already pledged indefinite stimulus and looking at depressed activity across the bloc, that seems justified. A positive Eurozone PMI surprise would of course be highly welcome but a negative reading could be what’s needed to chivvy tight-fisted governments into spending more.


 


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