Dubai: The holiday shortened week could see global stocks drift sideways, after hitting new highs this past week.
With the second quarter having come to a close on Wednesday, global companies will be preparing their quarterly earnings reports in the next two weeks, which also means they will be in a so-called ‘quiet period’.
US Fed minutes due Wednesday
The US Federal Reserve’s minutes from its last meeting will be released Wednesday afternoon, and there is potential for the market to learn more about the central bank’s stance on winding down its quantitative easing program.
Friday’s report that 850,000 jobs were added in June was better than expected. However, the unemployment rate missed expectations after rising by 0.1 percentage points to 5.9 per cent. Economists expected the rate to fall to 5.6 per cent.
US jobs data still a concern
The report was not seen as strong enough to encourage the US central bank to step away sooner from its relaxed policies. It was, however, seen as a positive picture of the jobs market.
US President Joe Biden’s embrace of a $1.2 trillion infrastructure spending deal has helped buoy indexes to fresh records, after worries that the Fed may unwind its easy money policies sooner than expected led to a brief swoon earlier this month.
US stocks rally to fresh highs
The benchmark S&P 500 is up about 14 per cent this year after hitting a fresh record in the past week, as did the tech-heavy Nasdaq.
At the same time, gains this month have been more concentrated, as investors piled back into the big technology stocks that led markets higher last year and for most of the past decade.
The benchmark S&P index, heavily weighted toward technology stocks, is up 1.8 per cent this month, but the average S&P stock has lagged. The equal-weighted S&P 500 is up just 0.3 per cent in June, which some investors view as a sign of waning confidence in the broader market.
Q2 expected to mark US economic peak
As business rebounds from the coronavirus pandemic, the second quarter is also expected to mark the peak for US economic and corporate profit growth, which could bring market unease as growth slows.
It’s quieter week ahead on the economic calendar, with 43 statistics in focus in the week ending July 9. In the week prior, 58 stats had also been in focus.
US dollar expected to get a boost
ISM Non-Manufacturing PMI numbers for June will be in focus on Tuesday. Following Monday’s U.S holiday, expect plenty of interest in the numbers. A fall in initial jobless claims to sub-300,000 levels would deliver a boost for the greenback.
On the geo-political front, Russia and China continue to be the main areas of interest for the markets. On the Iran nuclear agreement, updates on talks with Iran will also need monitoring.
US markets closed on Monday
The US equity, bond and commodities markets will all be closed on Monday in observance of Independence Day, which falls on Sunday. Most other international markets are open for trading.
While a new earnings reporting season will begin mid-month, there are still a few companies that need to report last quarter’s results, including US-based Levi-Strauss.
It will be also be the first week in Amazon.com’s history that Jeff Bezos will not be at the helm of the company he founded as he steps into the Executive Chairman role, and Andy Passy takes over as CEO.
More economic hints on China, EU
On Sunday evening China’s Caixin Services PMI will be released for the month of June, and it should offer more details on the pace of the economic recovery in that country. Growth has been slowing from its torrid pace earlier in the year, so Sunday’s report may confirm what we witnessed in May.
On Monday we’ll get a similar report for the European Union with the release of the Markit Services PMI for the area.
A recent increase in COVID-19 cases has prompted some countries to close their borders again, which will impact tourism. Investors will look for clues on how big that impact might be if the rise in cases persists.