Apple (AAPL) reports its quarterly numbers as earnings season continues apace on both sides of the Atlantic, whilst some big macro releases from the US should tell investors a lot more about where the Federal Reserve is taking policy.
First Friday of the month means only one thing: it’s nonfarm payrolls day. The monthly change in nonfarm employment is always closely watched as arguably the best indicator of the health of the US economy and future course of monetary policy.
The other number is the average earnings, which is the critical leading indicator for pushing up inflation to the Fed’s target rate.
The release usually results in some volatility in the US dollar, US Treasury notes (particularly the more policy sensitive 2-year bond), and US equities.
On Tuesday, the Fed’s preferred measure of inflation, the core PCE price index, is released. Core inflation has remained stubbornly low and this is presenting a problem for Fed officials as they seek to tighten monetary policy. Policymakers keep saying the soft data is transitory and they expect inflation to bounce back. The longer it goes on the less in touch they look with the data. Investors are already full of doubts with the US dollar pared back to its weakest in over a year. A strong PCE reading – anything above the 0.1% that’s been seen lately – could halt the rout in the greenback as it might signal the Fed is on course to hike again before the year is out.
Bank of England
The Bank of England’s interest rate decision comes on Thursday. It’s the first meeting of the Monetary Policy Committee since some fairly hawkish noises were made by a number of rate-setters. Expectations that the Bank could hike rates to 0.5% this month rose after 3 policymakers voted for higher rates last time. However a surprisingly large drop in inflation last month sent the hawks packing and all but killed off any chances of a hike in the summer. GBPUSD remains policy sensitive around the $1.30 level whilst there is little on the Brexit front to drive price action.
Plenty of earnings from Germany should keep the DAX pretty volatile this week. Thursday is the biggest day when Adidas (ADS), Bayerische Motoren Werke (BMW), Beiersdorf (BEI), Deutsche Telekom (DTE), Merck KGaA (MRK) and Siemens (SIE) all report. Combined these account for one quarter of the Germany 30 by index weighting so should be a day for the diary if you’re trading the DAX. Siemens results in particular should have an effect as it makes up around 10% of the DAX by weighting.
FTSE Interim Results
It’s another busy week for earnings in the UK, with a host of FTSE interim results due out. BP (BP), HSBC (HSBA), BAE Systems (BA), Inmarsat (ISA), Centrica (CNA), Taylor Wimpey (TW), Fresnillo (FRES) and Rio Tinto (RIO) are among the biggest companies to report half-year numbers. Also watch for the quarterly trading update from Next (NXT) following a pretty rocky time for its share price.
Source: ETX Capital