Fed policy meeting, US tech earnings, growth figures

Fed policy meeting, US tech earnings, growth figures

Plenty coming up this week. The big event will be the US Federal Reserve meeting that concludes on Wednesday. No changes to rates are forecast so the focus will be on any plans for additional stimulus.

The backdrop to this will be the debate in Congress as lawmakers try to reach agreement on another round of pandemic relief before measures expire at the end of the month.

Republicans are set to unveil their proposals for a fresh round of stimulus on Monday, including $1,200 per person in direct cash payments, an extended moratorium on evictions and reduced federal unemployment benefits.

There is plenty of company earnings action from both sides of the Atlantic including UK banks and Amazon, Apple, Facebook and Google.

The chief executives of these big four US tech giants will also be questioned in a House judiciary antitrust subcommittee hearing on Wednesday as part of probe into competition in the digital marketplace.

Back in Europe, EU negotiator Michel Barnier and UK counterpart David Frost meet for further discussions on the future relationship of the EU-UK. Talks remain deadlocked on two main sticking points — fishing rights and state subsidies — with no immediate solutions in sight.

For the data watchers there will be a raft of growth figures from around the world.

Companies news and earnings

Some of the biggest names in the tech sector report this week, with Apple taking centre stage on Thursday, as always. Weaker consumer spending owing to store closures during lockdown is set to weigh on revenue and investors will also be keen to learn if the iPhone maker will provide a forecast.

A surge in demand for online orders during lockdown is likely to pay off for Amazon when it reports the same day. The online retailer spent at least $4bn in response to the pandemic and investors will now focus closely on the outlook for the coming quarter now bricks and mortar outlets have reopened.

Google-owner Alphabet also reports on Thursday, when big drops in advertising spending are likely to hit home.

Facebook, however, is expected to shake off any such ad woes and on Wednesday post a rise in revenue.

US ecommerce group eBay reports on Tuesday, fresh on the heels of striking a deal worth $9.2bn to merge its classified ads business with Norway’s Adevinta.

All eyes will be on whether Royal Dutch Shell will pay a dividend when it reports on Thursday. Shell, like the wider energy industry, has been rocked by the pandemic. In April it cut its dividend for the first time since the second world war just as its earnings fell by half because of a collapse in energy demand and prices.

Fellow oil majors ExxonMobil and Chevron report on Friday. Exxon is expected to post its second quarterly loss in a row, with Chevron also set to swing to a loss.

For the pharmas, Pfizer, one of the runners in the race to develop a viable coronavirus vaccine, will be in focus on Tuesday. The UK’s AstraZeneca, also seeking a vaccine, reports half-year results on Thursday, a day after rival GlaxoSmithKline.

Four of the big UK banks report this week, when the focus will be on the provisions being made for the expected wave of bad loans made to help businesses during the pandemic, though this could be offset by a strong investment banking performance in some cases, as seen in recent Wall Street bank earnings reports.

Investors will also pay close attention to the banks’ outlook for the rest of the year.

Barclays reports on Wednesday, Lloyds and StanChart on Thursday and NatWest on Friday. HSBC will complete the line-up next week.

For the airlines Ryanair reports on Monday, Wizz Air on Tuesday and British Airways owner IAG on Friday.

Next will offer an insight into the wellbeing of high street fashion retail with a trading update on Wednesday.

UK telecoms provider BT has a trading update on Friday, when investors will be on the lookout for any more detail on the cost of the removal of equipment made by Huawei, which the UK government has banned from 5G networks.

Other names to watch among the many reporting this week include Aston MartinBoeing, Caterpillar, Colgate-Palmolive, Comcast, Conoco-Philips, Credit Suisse, Electronic Arts, Ford, General Electric, General Motors, Gilead Sciences, Harley-DavidsonKellogg, Kraft-Heinz, McDonalds, Pfizer, Pinterest, Procter & Gamble, Qualcomm, Santander, Spotify, Starbucks, Tiffany, Visa and Yum Brands.

Central Banks

The US Federal Reserve is widely expected to keep its interest rates on hold this week. Investors will instead be looking for clues as to what path the central bank will take to shore up an economic recovery that appears to be weakening.

The Fed has already slashed interest rates to zero, pledged to buy an unlimited quantity of government debt and unveiled a series of emergency measures that include facilities to support the markets for corporate debt and municipal bonds. 

Stocks on Wall Street have climbed more than 45 per since March as a result, but concerns remain about the sustainability of the recovery, prompting speculation as to what other tools are at the Fed’s disposal. 

Further reading

Elsewhere Ghana’s central bank is expected to keep rates on hold on Monday, as is Kenya at its meeting on Wednesday, though analysts do see some room for cuts at the latter.

Colombia is forecast to make its fifth successive cut on Friday, taking it down to levels not seen since the early 1990s.

Economic data

The first estimate of second-quarter US gross domestic product is out on Thursday when the damage coronavirus has brought to the world’s largest economy will become clearer. The consensus among economists points to 35 per cent annualised decline, the worst since the second world war.

Elsewhere in the Americas, Mexico’s first second-quarter GDP reading is expected to show a contraction of more than 20 per cent on last year, while Canada has monthly growth figures out on Friday.

There are also GDP figures from across Europe over Thursday and Friday.

France, Spain, Italy and Germany, as well as the eurozone as a whole, are likely to suffer big slumps.

Hong Kong’s GDP is set to contract further on Wednesday.

Other data points to watch this week are China’s purchasing managers’ reports on Friday, which will offer a chance to gauge the strength of economic recovery.

US durable goods orders are out on Monday and personal spending figures on Friday, while the much-watched weekly jobless claims on Thursday are expected to remain near the 1.4m mark.