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Week Ahead: Brexit crunch time, US earnings season kicks off
Welcome to your guide to the week ahead in the markets.
European Council Summit
It’s make or break time for Brexit. EU heads of state hold their next summit this week, starting on Thursday. The meeting also marks UK Prime Minister Boris Johnson’s last chance to agree a Brexit deal, but the UK’s latest proposals have not met a warm reception. If nothing is forthcoming, the recently passed Benn Act obligates the PM to request an extension by Saturday at the latest. Boris seems to have some plan to circumnavigate the legislation, although Downing Street is unsurprisingly quiet on the details.
The third quarter earnings season on Wall Street gets underway this week, with S&P 500 companies seen posting a year-on-year earnings per share decline for the third straight quarter.
As usual banks get the season off to a start. Financials posted decent gains in Q3, boosted by a strong +4.5% gain in September.
JP Morgan (Tuesday) is expected to deliver EPS of $2.45. In Q2 the company reported net income up 16% to $9.65 billion from last year’s $8.32 billion. EPS beat the $2.50 expected at $2.82, rising from $2.29 in the same quarter a year before. Net interest income is the concern in early September at the Barclays conference boss Jamie Dimon said he sees full-year 2019 net interest income down $500M from the last guidance.
Citigroup (Tuesday) posted good numbers in Q2 as well with EPS of $1.95 topping the $1.80 expected, although trading revenues were down. For Q3 the Street expects EPS growth of c13% at $1.97 a share. Revenues are expected to rise a little less than 1% to $18.54bn.
Wells Fargo (Tuesday) beat in Q2 but lower net interest income and comments about higher expenses acted as a drag. EPS for Q3 is seen as at $1.20, up 5.3% year-on-year, on revenues seen –5% at $20.85bn. In September the bank’s CFO lowered the net interest income for the third time in five months, with the company now seeing this key profit metric down 6% this year compared with 2018. Bulls will be clinging to anything positive on net interest income.
Netflix (Wednesday) has had a tough comedown and Wall Street has turned cold on the stock as the risk of a competitive spiral from the rise of rival streaming services threatens to derail the company’s remarkable growth. Investors have shown concern about subscriber growth rates that have started to falter. In Q2 global net adds of 2.7m massively missed expectations for 5m.
On the high frequency economic data front we are looking at the RBA meeting minutes and Chinese inflation figures early on Tuesday, with the German ZEW economic sentiment survey likely to be key for the European session.
Wednesday sees the CPI inflation numbers for the UK and Canada, with US retail sales also in focus.
Thursday, we have the Australian unemployment data, which is a key factor in the RBA’s thinking on monetary policy, before the Phill Fed manufacturing index ahead of the US session.
On Friday the focus will be the data out of China, with GDP, industrial production and fixed asset investment figures due.
Tentatively scheduled for Friday is the US Treasury Currency Report, which outlines countries that the US deems currency manipulators.
Earnings season is upon us again, here are the notable releases this week.
|October 15th||JPMorgan Chase & Co|
|October 15th||Johnson & Johnson|
|October 15th||Wells Fargo & Co|
|October 17th||Morgan Stanley|
|October 17th||Philip Morgan|
|October 18th||American Express|
Coming Up in XRay
There are plenty of great sessions coming up on XRay this year. Watch them live on XRay or catch up in a time to suit you.
Don’t forget to ask your questions in advance to firstname.lastname@example.org
|07.15 GMT||Oct 14th||European Morning Call|
|10.00 GMT||Oct 14th||LIVE Earnings Season Preview|
|15.45 GMT||Oct 15th||Asset of the Day: Oil Outlook|
|19.00 GMT||Oct 15th||LIVE Trader Training|
|18.00 GMT||Oct 17th||The Stop Hunter’s Guide to Technical Analysis (Part 7)|
Key Economic Events
There are lots of releases this week that are likely to impact the markets. Also remember that trade tensions and Brexit rumble on which make also cause volatility.
|09.30 GMT||Oct 15th||RBA Monetary Policy Meeting Minutes|
|09.00 GMT||Oct 15th||German ZEW Economic Sentiment|
|08.30 GMT||Oct 16th||UK CPI|
|12.30 GMT||Oct 16th||US Retail Sales|
|14.30 GMT||Oct 16th||EIA Crude Oil Inventories|
|00.30 GMT||Oct 17th||Australia Employment Change, Unemployment Rate|
|08.30 GMT||Oct 17th||UK Retail Sales|
|12.30 GMT||Oct 17th||Philly Fed Manufacturing|
|02.00 GMT||Oct 18th||China GDP, Industrial Production|
Week Ahead: Doves to dominate at Jackson Hole
Welcome to your guide to the week ahead in the markets.
As global bond yields fall and investors worry about a recession, all eyes will be on the central banker meeting this week in Jackson Hole. Whilst it’s rare for major policy announcements to emerge from the symposium, markets will be fixated on any signals from the Fed and others about the path of interest rates.
Minutes from the Fed’s last meeting will be parsed for clues about future rate cuts. With markets pricing in more cuts this year, these minutes will help show exactly where members stand on the issue.
A few earnings to watch for – Anglo-Australian miner BHP Billiton and some US retail sector stocks including GAP and Target bring up the rear as US second quarter earnings season winds down.
There are still a lot of earnings releases in the current week, including big name brands Target, Salesforce and Gap.
|Approx 22.30 GMT||19th Aug||BHP Billiton Ltd – Q4|
|Pre-Market||20th Aug||Home Depot – Q2 2020|
|Pre-Market||20th Aug||Medtronic Plc – Q1 2020|
|Pre-Market||21st Aug||Lowe’s Companies Inc – Q2|
|Pre-Market||21st Aug||Target – Q2|
|After-Market||22nd Aug||Gap – Q2|
Join our XRay sessions live, or watch them on catch-up at a convenient time. This week, we’ll be covering the following topics in our live video streams.
|07.15 GMT||19th Aug||European Morning Call|
|17.00 GMT||19th Aug||Blonde Markets|
|15.30 GMT||20th Aug||Asset of the Day: Bullion Billions|
|15.45 GMT||20th Aug||Asset of the Day: Oil Outlook|
|13.00 GMT||21st Aug||Asset of the Day: Indices Insights|
There’s a lot going on this week, with special notice paid to the Red meeting in Jackson Hole.
|08.30 GMT||21st Aug||UK Public Sector Net Borrowing|
|12.30 GMT||21st Aug||Canadian CPI|
|18.00 GMT||21st Aug||FOMC Meeting Minutes|
|07.15 – 08.00 GMT||22nd Aug||Eurozone Member PMIs (Services, Manufacturing)|
|11.30 GMT||22nd Aug||ECB Monetary Policy Meeting Accounts|
|Day 1||22nd Aug||Federal Reserve Jackson Hole Symposium|
|22.45 GMT||22nd Aug||New Zealand Retail Sales|
|12.30 GMT||23rd Aug||Canada Retail Sales|
|Day 2||23rd Aug||Federal Reserve Jackson Hole Symposium|
Apple earnings preview: eyes on services revs, margins and China
A whopper of a profits warning at the beginning of January has done nothing to dent Apple’s share price performance in 2019, which is +40% higher this year. So what happens now, with expectations reset lower? Here’s our quick take on what to expect as Apple reports its fiscal second quarter numbers after the close on Tuesday.
It’s all about the pivot away from iPhone unit sales to focus investor attention on Services revenues and the wider Apple ecosystem. Of course, iPhone unit sales won’t be reported.
Q1 marked a 5% decline in revenues company wide as revenues from iPhone sales declined 15%. Total revenues from everything else plus services was up 19%.
In its Q1 earnings update the company provided the following guidance for Q2:
- revenue between $55 billion and $59 billion
- gross margin between 37 percent and 38 percent
- operating expenses between $8.5 billion and $8.6 billion
- other income/(expense) of $300 million
- tax rate of approximately 17 percent
Wall Street is anticipating EPS of $2.36 v $2.73 a year ago, whilst revenues are also seen declining from $61.1bn last year to $57.4bn.
Dial back to the Jan warning from Tim Cook and it was China where the real trouble lay. We would expect some improvement here to be seen in this quarter’s numbers with demand for iPhones picking up again in the wake of price cuts.
Services in focus
On Services, clearly the marked it eyeing another bumper jump in revenues, which were up 19.1% in the first quarter. But the impact on overall margins will also be important. The higher margins here should deliver ongoing support to group margins. For Q1, it reported Services margins of 62.8% against 58.3% in the year before.
We’ll also be looking for anything relating to its suite of new products launched in March – credit card, streaming service, News+ and Arcade. Whilst only News+ was available after the launch event, we may get more of a feel of how these services will affect the bottom line – pricing will be of particular importance. Don’t hold out for much detail in the earnings report, although there could be something in the earnings call.
Markets will also be eyeing capital returns. A year ago the company committed to $100 in buybacks and dividends over a two-year period. We may well Apple outline further capital returns via an increase in the dividend (10% is being talked about, against a 16% rise last year) and more buybacks. Even if the number are a touch soggy the prospect of more capital returns should keep investors on side.
Average price target from the 36 analysts we track suggests a 3% downside to the current price at a little short of $200. Following a strong showing so far in 2019, Tuesday’s earnings may result in some changes to price targets on the upside.
Key focus: Are Services revenues really going to continue to accelerate enough to offset the plateau in iPhone sales? Is there evidence of a bounce back in China?