Attention switches to the US and China this week, especially bank earnings in America with two majors to reveal second quarter numbers that will impact market sentiment that has turned fragile.
In America, figures on retail sales, business inventories, industrial production, housing starts and inflation will be released along with a couple of business surveys.
News Friday of a downturn in consumer confidence confirmed a similar reading from another report on consumer sentiment. The two reports haven’t gone down well with investors.
The June retail sales figures are likely to be watched most closely, but they will be up on May (according to forecasts), but down on June last year for two reasons:
They will be depressed by the rise in petrol prices and mortgage rates that occurred into early June (both petrol and mortgage rates are now falling again).
And the figures will be compared with the June 2008 numbers which were boosted by America’s first attempted stimulus: the $US162 billion series of tax rebates and other tax changes that only provided temporary comfort.
The minutes from the Fed’s last policy meeting will also be looked at closely, especially for more complete commentary on the improvement the committee mentioned in its post meeting statement.
Chinese economic data are likely to show continued recovery.
In particular, June quarter GDP growth (due Thursday) is expected to have rebounded to 8% year-on-year, from the low of 6.1% in the March quarter.
Chinese inflation is likely to remain negative. The trade numbers were half released Friday showing some improvement, but exports and imports were both still negative.
In Australia, the National Australia Bank’s business survey is worth keeping an eye on to see whether the recovery in confidence is maintained.
We get the quarterly and the monthly reports which have lately shown a rise in business confidence, but not much on an improvement in business conditions.
We will also get the lending finance figures for May and the import numbers for June.
Mining and oil production reports start flowing this week with the biggest to be the half year and second quarter figures from Rio Tinto, which is very much in the news at the moment.
US June quarter profit reporting season starts in earnest. Consensus expectations are for a 35%-plus fall in earnings over the year to the June quarter.
Last week’s profit warning from Chevron surprised investors after Alcoa’s smaller loss and better sales had led them to become a bit more confident. Alcoa’s figures improved because of cost cuts and plant closures, not a pick up in demand of any note whatsoever.
Reuters reported Friday that second-quarter earnings for Standard & Poor’s 500 companies are expected to fall 35.7%, about the same projection as a week earlier.
Six Dow Jones industrials components and 31 S&P 500 companies are scheduled to release results this week.
In the banking sector, reports will come from Goldman Sachs Tuesday, JPMorgan on Thursday, and then Bank of America and Citigroup on Friday.
US analysts are saying all should show another solid trading quarter, but bad debts and losses in home loans and credit cards, plus commercial property lending will produce mixed outcomes.
Goldman Sachs has been rumoured to be releasing a big profit, one that will raise more fears that it has returned to its bad old ways of trading rather than banking.
All banks may face losses on their own debt issued over the past year.
Giant chip maker Intel Corp. and General Electric Co. will tell how the wider economy and tech sectors are travelling. Intel has been making noises about seeing an improvement in the etch area, GE says its losses in its finance arm are on the way down.
But what’s not known is the extent of damage done to both companies by the slump in world trade and exports from the US, and the weakness of the dollar which lifts export returns, but cuts offshore earnings.
What analysts will be looking for from the banks and Intel and GE (and other big groups) is some sort of commentary about the outlook for the next six months to a year and how they are finding business conditions.
Commentary on demand in the economy will also be looked for: it’s in companies like Intel and GE that the ‘green shoots’ have to start showing growth in terms of rising demand and sales.
Earnings performance based on cost cuts can’t go on for much longer to be believable for increasingly sceptical investors (who were not so questioning a month ago).
Reuters said that all 10 S&P sectors are expected to show year-over-year earnings declines, Thomson Reuters data showed.
Besides the June retail sales, the Producer Price and the Consumer Price Indexes for June, industrial production, weekly jobless claims and housing starts and permits, also for June, are being released. Figures for home loan foreclosures last month are also expected.
Tech giants, Google Inc and IBM also report this week. IBM’s results will flesh out Intel’s commentary from the services and hardware side. Google will be looked at for its ad revenues.
Healthcare giant, Johnson & Johnson reports Tuesday night, our time. This sector is tipped to produce a small improvement by some analysts.
In Europe we will see eurozone and EU wide consumer prices. It will be the second estimate and is expected to confirm the first reading of a fall of 0.1%.
In the UK, unemployment is expected to have risen in the latest figures out this week.
Philips, Europe’s largest consumer-electronics maker is due to produce second quarter results as will Nokkia, the phone giant, (its comments on expected demand for mobiles will be poured over by analysts) and Novartis, the drugs giant, is also expected to report. Home appliance giant, Electrolux is also due to
