learn from yesterday, live for tomorrow and hope for tomorrow

US equity markets are trying to grind higher in an attempt to break out of the trading ranges they have been stuck in for a while. As the S&P 500 holds the 2800 level, that technical analysts seem to focus on. A very strong earnings report from Microsoft helped support the S&P 500 at the end of the week. This is despite politicians attempting to put spanners in the works. Bond and equity markets largely ignored Donald Trump’s comments, however, the US dollar lost 4% on the week against its basket of other currencies. The Vix index rose modestly on the week. 

Donald Trump is acting like a wounded animal post his disastrous appearance in Helsinki. Taking on the Federal Reserve, attempting to influence interest rate policy, at the same time accusing the Chinese and European Union of currency manipulation. He was not finished with China as he suggested he could impose tariffs on all imported Chinese goods, attempting to deflect the news in any way he can. Brexit is hardly worth commenting on as the battle of anachronyms continues. It was pleasing to see the new Brexit negotiator push back against the European Union, about time. 

Leading European equity indexes fared pretty much as did US ones rising and falling over the week to finish almost where they started. 

Earnings will dominate the week ahead as Alphabet, Facebook Amazon GM, Ford, Visa, ATT, Coca-Cola, and MMM to name but a few report earnings. So far earnings season is going pretty well, earnings growth rate at just over 20%, according to Factset. What is often of more importance is guidance for the coming quarter rather than the retrospective reporting of the last quarter. So far nine S&P 500 companies have reported negative guidance and only two issuing positive ones. Let us hope that ratio improves in the coming days. 

Macro events that will focus investor attention will be the monthly ECB interest rate meeting. In reality, it could be a fairly dull meeting as the ECB is likely to reiterate comments made at the previous months meeting.  Flash Purchasing Manager surveys for the month of July for the Euro area and the US economies of both Manufacturing and Services will gain some commentary. Later in the week US durable goods orders and 2nd quarter GDP estimates will be released. Consensus forecasts are for the US economy to have grown by 4.1% in the second quarter. 

Posted on July 22, 2018 .