Chief Market Analyst Michael Hewson assesses this week's major market events.
See his week ahead video, the top events to watch, plus our key company earnings schedule. In this week's video, Michael examines the impact of events in Turkey, the sharp declines in the lira, and the possible spillover effects on the DAX and the euro. He also looks ahead to the latest UK data for wages, inflation and unemployment.
China retail sales & industrial production (July)
Tuesday: Last week’s trade data suggested that the Chinese economy hasn’t been affected by the US tariffs that were slapped on $34bn of its goods at the beginning of July. Furthermore, the big jump in imports suggests that domestic demand remains fairly robust, which should augur well for not just for retail sales, but industrial production as well. Higher energy prices combined with higher volumes of coal, iron ore and crude oil helped support imports, which should bode well for industrial production.
German and EU Q2 GDP
Tuesday: At the end of last month the latest flash EU GDP number showed a drop from 0.4% to 0.3%, which in the wake of a weak French Q2 GDP number, has raised concerns that growth in Europe is slowing down more quickly than feared. This week’s German Q2 GDP could help push some of those worries aside. That is if the German economy rebounds from the slump seen in Q1, where the growth rate declined by 0.6%, falling to 0.3%. The big fear is that trade concerns, which have impacted on economic growth in Q2, manifest themselves in Germany’s Q2 numbers, which in turn will hinder the latest revision to EU Q2 GDP. Another 0.3% figure from Germany would be a disappointment, raising concerns that the Q1 slowdown isn’t a temporary one.
UK CPI, wages & unemployment data
Tuesday & Wednesday: With the political stalemate between the UK government and Brussels and fears about a no-Brexit deal rising by the week, the UK economy continues to be at the forefront of investors’ minds. As far as the wider economy is concerned, there are weak spots, despite the recent Bank of England rate rise and the stronger Q2 GDP number we saw last week. Wage growth remains a worry as it appears to have plateaued at 2.7%, despite a labour market that continues to tighten. Higher fuel costs are also hurting consumer spending, even though the inflation rate fell to 2.4% in June. Retail sales have also started to slow despite a hot summer which saw sales of food, drink and clothing surge. There was a surprise 0.6% decline in June as shoppers preferred the beach and the pub to shopping more generally.
Balfour Beatty H1 results
Wednesday: The UK construction sector has had a turbulent few months, from the collapse of Carillion to the ‘Beast from the East’, which hit economic activity quite hard in Q1. Despite this, Balfour Beatty – which almost had a ‘Carillion’ moment a few years ago – has managed to set itself apart with a decent performance over the past 12 months. At its most recent trading update in March, the company saw underlying profit more than double to £196m. This followed a decision to focus on higher margin work and steer away from the low value contracts that brought Carillion to its knees. The company did take on some of Carillion’s employees as it picked up some of the legacy work, including the Aberdeen Bypass. While this incurred extra costs, the company’s order book remains solid, as does the outlook as it continues its work on the Thames Tideway Tunnel and HS2. Having divested from its underperforming overseas operations, investors will be looking at how management see the outlook for the sector as we look towards the second half of the year.
Nvidia Q2 results
Thursday: The last two quarters have seen technology company Nvidia post record revenues, with profit also rising strongly in Q1. The company has been helped by a strong gaming market, as new games with improved graphics drove sales of new and better gaming consoles. The Nintendo Switch helped boost Q1 revenue by 66% to $3.2bn, while the rising popularity of cryptocurrencies has also helped drive demand for faster and more powerful chipsets. With the share price within touching distance of its recent record highs, the bar to further gains is increasingly high, so investors will not only be looking for continued revenue growth but also stronger forward guidance.
Walmart Q2 results
Thursday: Walmart has been one of the few US retailers that has been able to compete with Amazon in terms of the online shopping experience. Big-box retailers have come under increasing pressure from the low overheads model that Amazon is able to offer, but Walmart is managing to keep up. It has a stronger grocery offering and is also transforming its international exposure, looking to sell its stake in Asda to Sainsbury’s, while paying $16bn for Indian ecommerce giant Flipkart, stealing a march on Amazon in what could be a huge future market. The company said the purchase was likely to reduce its profit for 2019 by about 25c a share. Walmart’s stake in Chinese ecommerce company JD.com has also had its ups and downs after it posted a $1.8bn loss in the previous quarter.
EU CPI (July)
Friday: Inflation has been one of the indicators that has started to show signs of life in recent months, though not necessarily for the right reasons. Most of the rebound has been due to a rise in energy prices – the worst kind of inflation for consumers and business alike. This is raising concerns of higher prices and slowing growth or stagflation, a central banker’s worst nightmare. Expectations are for the headline consumer price index (CPI) to remain steady at 2%, while core prices remain subdued at 1%.
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Selected UK & US company announcements
|Monday 13 August||Results|
|Tuesday 14 August||Results|
|Agilent Technologies (US)||Q3|
|Capital & Regional (UK)||Half-year|
|Home Depot (US)||Q2|
|John Menzies (UK)||Half-year|
|Rockwell Medical (US)||Q2|
|Wednesday 15 August||Results|
|Balfour Beatty (UK)||Half-year|
|Cisco Systems (US)||Q4|
|CLS Holdings (UK)||Half-year|
|Thursday 16 August||Results|
|Allied Minds (UK)||Half-year|
|Applied Materials (US)||Q3|
|Awilco Drilling (UK)||Q2|
|JC Penney (US)||Q2|
|KAZ Minerals (UK)||Half-year|
|Madison Square Garden (US)||Q4|
|Friday 17 August||Results|
|Deere & Co (US)||Q3|
Company announcements are subject to change. All the events listed above were correct at the time of writing.
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Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.