As global markets gear up for significant central bank decisions this week, investors are closely monitoring two key factors: earnings reports from major companies and the evolving economic situation in China.
Date: July 25, 2023
Place: New Delhi, India
In the United States, attention is on the upcoming earnings announcements of several heavyweights, including Microsoft (MSFT.O), Google’s parent company Alphabet (GOOGL.O), Visa (V.N), recruiter Robert Half (RHI.N), General Electric (GE.N), 3M (MMM.N), Dow (DOW.N), chipmaker Texas Instruments (TXN.O), and grain dealer Archer-Daniel Midlands (ADM.N). These reports, along with the outlooks provided, carry the risk of either satisfying or disappointing markets that are currently anticipating a “soft-landing” slowdown in both economic growth and inflation.
In Europe, investors are awaiting earnings reports from Unilever (ULVR.L), luxury goods company LVMH, and eyewear manufacturer EssilorLuxottica (ESLX.PA), which will be released in London and Paris.
Meanwhile, in the Asian session, investors reacted positively to the readout from an earlier-than-expected Politburo meeting in China. The Chinese government’s pledge of support provided hope for a potential turnaround in the country’s markets. As a result, property stocks in Hong Kong saw a surge in value. However, it’s worth noting that these stocks had previously experienced a significant decline, so the gains are seen in the context of a low starting point. Both the Hang Seng index (.HSI) and the Shanghai Composite index (.SSEC) rose, but the overall market sentiment remains cautious.
The Chinese yuan experienced a jump, which was reportedly aided by purchases made by China’s state banks in both the onshore and offshore markets early in the Asian trading day.
Morgan Stanley analysts highlighted a notable change in the language of the readout, with the absence of the familiar line stating “property is for living not for speculation” and the inclusion of a pledge to “optimize” policy. This change in wording has been met with some skepticism, as it is reminiscent of the initial stages of COVID-related easing, which later led to significant policy shifts. Traders are currently buying into the optimism, but concerns persist about a potential cash crunch affecting major Chinese property developers like Country Garden and Dalian Wanda in the future.
Looking ahead, the Eurozone bank lending survey, set to be released on Tuesday, will provide insights into the borrowing conditions in the region. This information is particularly relevant ahead of upcoming rate decisions from both the Federal Reserve and the European Central Bank, with rate hikes expected in both cases.
As the week progresses, investors will also be keeping a close eye on the Bank of Japan, as they consider whether any policy adjustments will be made during its upcoming meeting on Friday.
Key Developments for Tuesday:
Economic events: German LFO surveys, Eurozone bank lending survey
Earnings Reports: Unilever, EssilorLuxottica, LVMH, Danaher, Microsoft, Alphabet, Texas Instruments, Verizon, Visa, General Electric, General Motors, 3M, ADM, Spotify, Snap, Dow
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Sources- Market Screener, Reuters, The Print
