Monday Jul 29 2024 14:41
6 min
1. Stocks nudge higher ahead of week packed with interest rate meetings, earnings reports
2. Markets closely watching signals ahead of Wednesday Federal Reserve meeting
3. Bank of Japan to announce interest rate decision on Wednesday
4. Magnificent Seven: Microsoft, Apple, Meta, Amazon earnings all in focus this week
5. Japanese yen holds on to gains, oil slides on Middle East concerns
Global stocks nudged higher on Monday as investors braced for a week filled with earnings reports and central bank meetings. The U.S. Federal Reserve and the Bank of England might hint at interest rate cuts, while Japan could move towards tightening monetary policy.
Key economic data to be released this week includes the U.S. jobs report for July, closely watched surveys on U.S. and global manufacturing, and Eurozone inflation and GDP figures.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, was cited by Reuters as saying that markets in the U.S. were approaching “crunch time” in light of the Fed's interest rate decision this week:
"U.S. markets are approaching crunch time. This coming week could very well set the path for markets over the near term”.
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The U.S. Treasury will announce its quarterly bond sale plans, and China's politburo meeting might introduce additional stimulus following unexpected rate cuts last week.
After a mild June inflation report, markets are betting that the Federal Reserve will hint at a September rate cut during its policy meeting on Wednesday.
Futures are fully priced for a quarter-point cut and imply a 12% chance of a 50-basis-point cut, with 68 basis points of easing expected by December.
Reuters cited analysts at Goldman Sachs as saying:
"The FOMC is set to hold steady [at its policy meeting] but is likely to revise its statement to hint that a cut at the following meeting in September has become more likely. We now see the risks to the Fed path as tilted slightly to the downside of our baseline of quarterly rate cuts, though not quite as much as market pricing implies."
The Bank of Japan also meets on Wednesday, with markets suggesting a 70% chance of a 10-basis-point rate hike to 0.2%, with some chance that it the key rate could move by 15 basis points.
Meanwhile, investors are uncertain about the Bank of England's actions on Thursday, with futures showing a 51% probability of a interest rate cut, which will reduce the key rate to 5%.
The MSCI All-World index rose 0.2%, with European stocks in the Stoxx 600 index climbing 0.4%, driven by gains in the pharma and tech sectors. However, the consumer products sector pulled back as shares in Enfamil formula maker Reckitt Benckiser fell to their lowest since early 2013 after a U.S. court ruling against rival Abbott in an infant formula case.
This week, around 40% of the S&P 500 index by market value will report earnings, including major tech firms Microsoft, Apple, Amazon, and Meta Platforms. High expectations mean any disappointment could impact their high valuations. Google-parent Alphabet and Tesla both disappointed investors last week.
"With some sizeable moves implied by the options market for the individual names on the day of reporting, movement at a stock level could resonate across other plays within their sector and potentially promote volatility," Chris Weston, head of research at broker Pepperstone, told Reuters. He added:
"Company earnings don't come much bigger than Microsoft, where the options market implies a move (higher or lower) of 4.7% - the after-market session on Tuesday could get lively."
Futures on the S&P 500 and Nasdaq 100 were up 0.4-0.6%. In currency markets, the Japanese yen held on to its recent gains, keeping the dollar flat at 153.845. The euro dipped 0.3% to $1.0817, and the pound also dropped 0.3% to $1.2825.
In commodities, gold inched up 0.1% to $2,387 an ounce, supported by the potential for a dovish Fed.
Oil prices fell amid volatile trading due to concerns over a widening conflict in the Middle East after a rocket strike in the Israeli-occupied Golan Heights, which Israel and the United States blamed on Lebanese armed group Hezbollah.
Brent crude was down 0.7% at $80.57 a barrel, while U.S. crude fell 0.8% to $76.55.
When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.
Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.
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