As we hit the last few days of July, we are facing a blockbuster week ahead for markets, arguably the single-most important week of the summer which sees a convergence of central bank, macroeconomic, earnings and geopolitical events all hitting at once. As DB's Jim Reid notes, "it’s probably easier to start with what I think are the potential market moving day by day highlights before we expand deeper into the main events: Today we see the latest Treasury borrowing estimates as part of the quarterly refunding announcement (QRA). Tomorrow sees Microsoft report, US JOLTS, German/French/Italian Q2 GDP and German July CPI. Wednesday sees Meta report, both the BoJ and the Fed deciding on rates, China PMIs, French and Eurozone July CPI, and Australian Q2 CPI. Thursday sees Apple and Amazon report, various global PMIs and the US ISM, and the BoE decision. Friday sees US payrolls."
It’s hard to guess which of the above will have the largest impact on markets but it’s probably going to be the four Mag-7 tech companies that report this week. They cover around 19.7% of the S&P 500 on their own so will have a huge influence on sentiment. The Mag-7 is down -12% from its peak 2 and a half weeks ago with the Russell 2000 outperforming by around 25pp over this period which shows the extreme rotation that has been occurring over this period. So their results will be a huge driver with some nerves after Tesla and Alphabet disappointed last week.
With the Fed likely to start an easing cycle soon - as the WSJ's Nikileaks definitvely previewed over the weekend - the FOMC (Wednesday) has the potential to be a big event but the likelihood is that they will simply signal a rate cut which is a reasonable baseline for September without pre-committing. So it may not be hugely market moving. Jackson Hole (August 22-24) may see a more definitive signal from Powell. Note that no economist on the street expects a cut this week with the market pricing in a very small (4%) probability.
Earlier that day the BoJ seem more likely than not to hike rates and to reduce bond buying. Momentum towards the hike has been building over the last couple of weeks with the Yen now at 153.28 from a low of 161.69 on July 3. In another close decision our UK economists thinks the BoE will vote 5-4 to cut rates on Thursday.
With all the above it’s easy to forget Friday’s payrolls, but with some signs that the US labor market is weakening it is a very important release. DB's economists find this tricky to forecast given storms in Texas earlier this month. They think headline (+175k vs. +206k last month) and private (+150k vs. +136k last month) payrolls will contain a roughly 15k drag from the storms. This shouldn’t impact an unchanged unemployment rate of 4.1% though. We’re not far from breaching the Sahm rule as on a 3m average basis we’re 0.43pp above the lows. However the bulls would point to a rise in the labor force rather than lay-offs being the main driver. Ex Fed President Dudley did point out last week that this also happened around the 1970s recessions though.
For European CPI, DB's economists expect July flash data to come in at 2.59% YoY (2.52% in June) for the Eurozone, with core HICP to remain at 2.87%. Across countries, they forecast HICP in Germany at 2.5% (2.5%), France at 3.0% (2.5%), Italy at 1.1% (0.9%) and Spain at 3.4% (3.6%). More of their analysis and forecasts can be found in the latest inflation chartbook here .
As a curiosity, this week marks a year since the huge bearish surprise for bond markets from the Treasury QRA. Today’s borrowing estimates and Wednesday’s refunding statement should be much calmer affairs.
Finally, a whopping 34% of the S&P reports earnings this week, including names such as MCD, MSFT, AMD, PYPL, SBUX, PFE, BA, META, QCOM, MRNA, AMZN, INTC, COIN, XOM, CVX.
Courtesy of DB, here is a day-by-day calendar of events
Monday July 29
Tuesday July 30
Wednesday July 31
Thursday August 1
Friday August 2
Finally, looking at just the US econ calendar, Goldman writes that the key economic data releases this week are the JOLTS job openings report on Tuesday, the ISM manufacturing index on Thursday, and the employment report on Friday. The July FOMC meeting is on Wednesday. The post-meeting statement will be released at 2:00 PM ET, followed by Chair Powell’s press conference at 2:30 PM.
Monday, July 29
Tuesday, July 30
Wednesday, July 31
Thursday, August 1
Friday, August 2
Source: DB, Goldman