Synopsis of the week
Last week it was the turn of the Bank of Japan to kick start its economy. However, in comparison to the boost that the UK & European markets received from the Bank of England’s actions in the week before, the Bank of Japan rather missed the mark.
Equity traders have shrugged this off all too quickly. Currency traders have spent much of the week positioning themselves ahead of an expected interest rate cut from the Reserve Bank of Australia.
Can we expect the feast of stimulus that equity traders have been dining on to end soon?
Probably not, as central banks around the globe battle to keep investor confidence high and currency valuations low.
Inflation figures continue to be an area of embarrassment for central banks. This week we see the aspirational targets of 2% once again being missed. With the OPEC Nations continuing to oversupply the oil markets it’s hardly surprising most countries are more concerned with the looming threat of deflation rather than increasing their inflation rates.
Last week’s market rumour of an OPEC meeting on reducing supply to be held in Algiers briefly saw Crude spot prices spike. But this increase swiftly evaporated as Saudi Arabia announced record oil production levels later that very same week.
The week ahead
Wednesday will see the latest FOMC meeting minutes released. Ahead of this the market is factoring about a 40% chance that the US raise rates before the end of the year. Even with Non-Farm payrolls and unemployment figures over the last couple of weeks giving room for an interest rate hike, currency markets remain unconvinced that change should be expected just yet. These minutes will show how vigorous the debate surrounding change has been and will give the next tangible indicator to US Dollar speculators.
The US reporting season is almost at an end. But the headline Earnings Per Shares figures continue to defy logic with roughly 80% coming in ahead of expectations.
The assessment of where fair value is seems complicated. Fuelled by the seasonal debate over what’s happening, analysts setting the bar too low or companies doing better than expected.
We still have a few big hitters yet to report with Cisco Systems, Lowe’s, Staples, GAP, Walmart & Estee Lauder amongst them. European equity reporting is also offering traders, corporate data to digest. Bovis Homes and Balfour Beatty will give a little more clarity on how BREXIT has affected the UK housing market when they report.
The mining heavy FTSE index will be bracing itself for figures being released from BHP Billiton, Antofogasta, KAZ minerals and Evraz.
Equity releases in mainland Europe will be thin. Closer to home, Swiss equity traders will be sitting a little more nervously as on Thursday we’ll see both Nestle and Swisscom earnings releases.