Week Ahead: Uber IPO incoming, Lyft reports earnings, Walt Disney awaits the Endgame

Week Ahead

Coming up this week: one of the biggest IPOs in history as Uber goes public, communications and policy decisions from several leading central banks, as well as key company earnings reports.

Traders seem to be in a frenzy ahead of Uber’s highly-anticipated stock market debut, but will the poor performance of rival Lyft have tainted the shares? Earnings season may be slowing, but there are still some top companies left to update. The focus of much of the week for the FX market will be commentary from central bankers. Top tier UK and US data on Friday could be another source of volatility.

Uber: huge demand, high valuations, no profits

How much are markets willing to pay for a unicorn that sucks in cash and has yet to make a profit? Up until Lyft’s IPO, it seemed the answer was ‘a lot’. But despite opening over $15 above its IPO price, Lyft stock quickly tumbled. As happened to Snap Inc a couple of years back, a must-have stock quickly became a damp squib. Those IPO prices seem like distant memories for the languishing share price.

Ride-hailing giant Uber could be different. While also not profitable, the company dominates the domestic market, has a huge international presence, and boasts several other strings to its bow that Lyft doesn’t, such as Uber Eats and Uber Freight. The company is even working to develop flying taxis.

Uber will go public on Thursday 10th, potentially raising up to $10 billion for a valuation in excess of $80 billion. Has the debacle of Lyft shown that markets aren’t really that eager to hold a piece of a loss-making tech startup? Or is this an indicator that in the battle of the ride-hailers, traders are waiting to throw their backing behind Uber?

Forex: central banks dominate the week until Friday’s top tier data

The Reserve Bank of Australia announces its latest official cash rate decision during the Asian session on May 7th. This is just the start of a string of policy communications from some of the world’s biggest central banks. The Bank of Japan publishes its Summary of Opinions and policy meeting minutes in the following session. The Reserve Bank of New Zealand follows with its OCR decision. There’s also a press conference and inflation expectations from the RBNZ to watch.

The European Central Bank publishes the accounts of its latest policy meeting during Tuesday’s European session. As with most of these communications, the risks seem tilted to the downside. The Federal Reserve is still cautious, albeit less so following last week’s FOMC meeting, so it’s hard to see how any of the other world’s central banks could find much room for optimism. We’re certainly not expecting that from the BOJ or the ECB.

Markets are unlikely to be expecting bullishness from President Mario Draghi and colleagues. Even so, there are still downside risks to the euro if it seems that the Governing Council seems in favour of more quantitative easing. A more bullish case for EUR/USD notes the descending impulse wave pattern on the daily chart. Five complete waves in the trend suggesting a potential three wave correction which could push the pairing higher.

Meanwhile, the Aussie is braced for a potential rate cut. Nothing is a given, but there is a strong consensus amongst analysts that a downward move is imminent. Meanwhile, the RBNZ will likely signal that it intends to remain sitting on its hands for a long time to come. Perhaps frozen policy could be an upside for the Kiwi, with traders breathing a sigh of relief that the RBNZ isn’t planning on following the RBA on a more dovish trajectory.

False hope from UK growth data, US CPI could dash rate cut hopes further

US CPI figures wrap up the week, which could tilt the US monetary policy outlook ever-so-slightly back towards the hawkish side of the spectrum. A solid consumer price index reading, while not the Fed’s favourite measure of inflation, could give markets reason to expect a little more optimism at the next policy gathering.

The UK’s first quarter GDP print is also due on Friday. This could make interesting reading. While analysts generally agree that the UK economy is likely to slow this year, as Brexit uncertainty and softer global growth conditions weigh on output, companies have been busy stockpiling ahead of the UK’s departure from the EU. This flurry of activity could inflate the first-quarter reading. It’s already helped push some for the PMIs for the January-March quarter higher.

Equities: Lyft to chronicle losses, Disney to pave the way for Q3 strength

Earnings season may be winding down, but there are still some points of interest on this week’s calendar. BMW kicks things off with its Q1 earnings during Tuesday’s European session. The highlight, however, will be the after-market first-quarter results from Lyft.

It’s been a bumpy road for the ride-hailing company since its IPO. The stock has plummeted following the traditional debut surge to trend around 30% lower.

The issue of profitability is key. Lyft will undoubtedly report another large loss for the first quarter. Traders will want to know how quickly the company can slow the cash burn and when management envisions the company entering the black.

Lyft had better make some progress fast, or it could see itself becoming another Tesla – constantly battling the short sellers and limping from quarter to quarter.

There are a trio of euro stocks due on Wednesday: Siemens, Commerzbank, and Wirecard. After being hit by an accounting scandal over the past few weeks, Wirecard will be hoping to return the focus to its fundamentals and away from its business practices. A poor set of numbers could see Wirecard tumble, especially as there is no longer a ban on shorting the stock.

Walt Disney releases prequel to highly-awaited Q3 results

Walt Disney releases its Q2 figures after the US closing bell on Tuesday. The House of Mouse is riding high at the moment, boosted by the recent announcement of its long-awaited streaming service, and the storming box office success of the Avengers: Endgame, the studio’s latest Marvel superhero offering. With the record-breaking film having been released during the company’s fiscal third quarter (a period which also contains the hugely-successful Captain Marvel) management’s latest guidance should make for interesting reading.

Thursday brings fourth-quarter earnings from BT Group and AGMs from Adidas and Ford Motor Co.

Indices: S&P to retreat from highs as rate cut odds dwindle?

The S&P 500 hit a fresh record intraday high last week, as well as notching up a record closing high. The strong number of beats this earnings season (against a particularly low set of expectations) helped push markets that little bit higher.

But equities lost a key fundamental driver last week. The Federal Open Market Committee concluded that the US economy is on a pretty solid footing, even if it is lacking inflation and recent PMI’s have been softer than hoped.

This means the odds of a rate cut this year aren’t as high as the markets have been counting on. Indices were quick to undo some of their previous bullishness. President Donald Trump may be demanding a 1% cut to the federal funds rate and another round of quantitative easing, but the Fed won’t bow to such request and this has left the equity rally looking overextended.