The upcoming World Week will likely focus on Consumer price inflation (CPI) in the United States data this week, Wednesday.
Nonetheless, here are the final highlights of the second quarter earnings season from Zacks’ research director Sheraz Mian:
1. The second quarter earnings season’s picture is one of overall strength, with aggregate total quarterly earnings on track to hit a new all-time high and impressive momentum on the revenue side.
2. For the 378 S&P 500 members who have already released their second quarter results, total revenues are up + 103.8% on top revenues of + 28.2%, with 87.3% beating estimates. EPS and 86.5% exceeding revenue estimates.
3. While the disproportionate rate of profit growth is mainly due to easy comparisons, mainly in the finance industry, the performance on the income front (growth rate as well as percentage of beats) is higher than we have seen in other recent times.
4. For the Tech sector, we now have Q2 results of 85.1% of the sector’s market capitalization in the S&P 500 index. The total profits of these tech companies are up + 66% from the previous year. same period last year on higher revenues of + 26.3%, with 96.2% exceeding EPS estimates and 94.3% exceeding revenue estimates.
5. For the financials sector, now have second quarter results of 82.6% of the sector’s market capitalization in the S&P 500 index. The total profits of these finance companies are up 179.4% compared to the same period last year, with revenue up + 8.5%, with 92.7% exceeding EPS estimates and 81.7% exceeding revenue estimates.
6. Excluding exceptionally strong financial sector earnings growth, total second quarter earnings growth for the rest of the index members that released results would be up + 88.6% on average. higher income of + 31.6%.
7. Looking at the second quarter as a whole, when combining the actual results of the 378 index members that have released reports with the estimates of upcoming companies, total earnings for the S&P 500 should be up by 89.7% compared to the same period last year. on a turnover up + 23.5%, with a growth rate in constant increase because the companies post better results than expected.
8. Looking at the calendar year chart for the S&P 500 index, earnings are expected to increase + 41.7% on higher earnings of + 12.4% in 2021 and increase by +9, 7% on higher incomes of + 6.5% in 2022. This would follow a decrease of -1.7% in 2020.
9. The implied âEPSâ for the S&P 500 Index, calculated using the current P / E 2021 of 23.1X and the index close, on August 3, is $ 191.77, compared to $ 135.38 in 2020. Using the same methodology, the index ‘EPS stands at $ 210.47 for 2022 (P / E of 21.0X). Multiples were calculated based on the index’s total market capitalization and ascending aggregate earnings for each year.
Next are Reuters’ five global market themes, reorganized for equity traders.
These are five events and themes that are likely to dominate global financial markets next week.
(1) On Wednesday, consumer price inflation in the United States came out
US consumer price data, released on Wednesday, will provide answers to one of the most pressing questions in global markets right now: How far is the current spike in US inflation? sustainable?
Last month’s 0.9% jump was the biggest gain since June 2008. May was also quite dynamic at 0.6%, and economists polled by Reuters believe July’s figure won’t be far behind. at 0.5%.
The Federal Reserve hawks are watching these numbers … well, like hawks. Another hot figure will strengthen their case for the central bank stimulus sooner rather than later. This could cause summer squalls in record stock markets and searing bond markets.
(2) Chinese data shows damage from government crackdown
Chinese data in the coming days is expected to reveal how much Beijing’s regulatory crackdown, recent flooding in Henan province, and the new wave of COVID-19 – both at home in and in neighboring countries – are doing the job. giant economy.
There could be contradictions. There is a slowdown in credit growth due to the repression of indebtedness and local government debt, as well as a slowdown in exports after a record second quarter. At the same time, Producer price inflation (PPI) will be monitored to see if the authorities’ attempts to quell speculation are having much impact.
The headwinds on growth have stimulated calls for further reductions in reserve requirements and even possibly policy rates, both in and around China. Thailand’s tourism-dependent currency is at its lowest in 2018, forcing the Bank of Thailand to become dovish as the Philippines could copy China’s advance on Thursday and reduce its own reserve requirements.
(3) Tourist stocks are now lagging behind
Back in March, Morgan stanley predicted another summer lost to tourism, surprising some, given the vaccine optimism at the time. Now, in August, when beaches and towns are normally teeming with vacationers, their appeal sounds resounding.
Spain received 75% fewer tourists last month than in June 2019. The Greek islands, billed as “COVID-free”, are again subject to travel restrictions and are suffering from forest fires. Phuket in Thailand only has 1% of the visitors it had before Turkey’s second-quarter tourism revenue was $ 3 billion, up from $ 8 billion in the second quarter of 2019, while Kenya n ‘received only 300,000 visitors in the first half of the year, compared to 2 million in 2019.
Given that tourism contributes directly to 6% of European GDP and almost 8% of employment, it is not surprising that the expectations index of euro area service companies has fallen to its lowest level in three months and that the share of trips to Europe has lost 13% since April. The Thai baht has fallen to its lowest since 2018 – enough to make you want a vacation.
(4) COVID insurance claims don’t add up to the big bill. here’s why
Have you tried getting COVID insurance and failed? Most of the major European insurers have removed pandemic coverage from their policies, setting them up for much stronger results than last year, when the virus caught them off guard.
from France AXA and Italy Generali and Germany Allianz have already landed good numbers and next week sees the turn of Zurich, Dutch pair Aegon and NN and Brittany Aviva, M&G and Prudential.
And it’s not just COVID life insurance from business claims that will be of interest. Activist investor Cevian recently took a 5% stake in Aviva, and Prudential is severing its US branch under pressure from another corporate raider, Third Point.
(5) On Thursday, the African nation of Zambia votes
Zambia will head to the polls on Thursday in what appears to be a close election between incumbent President Edgar Lungu and serial challenger Hakainde Hichilema, known as HH.
Analysts say it will likely be decided by young people and first-time voters frustrated by an economy with the highest unemployment rate in 10 years and skyrocketing cost of living due to the currency collapse.
He is also in default. Debt restructuring was put on hold until after the election, but it is not a simple restructuring. It is supposed to be the first big test of the âcommon frameworkâ debt relief plan put in place by the G20 countries last year. They need Zambia to be a success for other reluctant countries to follow suit, so whoever wins the election will be firmly in the spotlight.
Top Zacks # 1 Rank (strong buy) Stocks
I see a lot of mining stocks on our # 1 list these days.
(1) BHP Group (BHP – Free report): It is a $ 77 Australian mining stock with a market cap of $ 113.4 billion. I see a Zacks Value score of B, a Zacks Growth score of C, and a Zacks Momentum score of D. This stock has been stuck in a range since early March.
(2) VALE (VALLEY – Free report): It is a $ 21 Brazilian iron ore stock with a market cap of $ 107.6 billion. I see a Zacks Value score of A, a Zacks Growth score of B, and a Zacks Momentum score of A. Stock prices here haven’t risen since early May.
(3) Glencore (GLNCY – Free report): It is a $ 9 Switzerland-based mining stock with a market cap of $ 59.5 billion. I see a Zacks Value score of A, a Zacks Growth score of A, and a Zacks Momentum score of D. Again, this year’s high was seen in early May, but the graph is more constructive.
The bullish / bearish question: is all the good news about commodity prices already incorporated?
Global key macro
Before the markets opened in the United States, we got the PPI from China for July.
It was up + 9.0% year-on-year, the National Bureau of Statistics said on Monday. This is due to the sharp increases in the prices of crude oil and coal. In the first 7 months of 2021, it grew by + 5.7%.
China’s CPI, however, only rose + 1.0% year-on-year.
This data will set the tone for global opinions on intermediate and likely commodity prices.
On Monday, JOLTS US job posting data is expected to show 9.4 million openings.
Tuesday, we get the data on foreign direct investment in China (+ 28.7% year-on-year), new loans (1,200 billion) and M2 money supply (+ 8.6% year-on-year growth). Interestingly, the growth of M2 equals the increases in PPI there.
The optimism of American small businesses NFIB comes out. 102.5 was the previous reading.
Wednesday, the US CPI for July is expected to be up + 5.3% y / y, and the core CPI is expected to be up + 4.3% y / y.
Thusday, the US PPI excluding food & energy should be up + 5.7% y / y in July.
Friday, U. of Michigan consumer sentiment is expected to be up to 82 from 81.2.
Don’t be fooled.
The 1.28% 10-year US Treasury price entering the coming global week is NOT an approximation of the core US CPI.
This low 10-year US Treasury rate anticipates âsafe havenâ flows from outside the United States, concerns about global growth and the likelihood of an imminent reduction in Fed âQEâ.
Overall, it will always be interesting to note the reaction of the stock market to the US CPI data.