Stocks Gain in Packed Week of Earnings and Rate Decisions

 

Global stocks edged up on Monday as markets brace for a week filled with earnings reports and central bank meetings. The US and UK may signal interest rate cuts, while Japan could increase borrowing costs in a move toward normality.

Key Highlights:

1. Market Movements:

   • MSCI All-World index rose 0.2%.
   • European stocks also gained 0.2%, driven by energy companies amid rising oil prices.

2. Oil Prices:

   • Oil prices inched up due to fears of escalating conflict in the Middle East following a rocket strike in the Israeli-occupied Golan Heights, attributed to Hezbollah.
   • Brent crude increased by 0.2% to US$81.27 per barrel.
   • US crude remained flat at US$77.20 per barrel.

3. Upcoming Economic Reports:

   • US jobs report for July.
   • Surveys on US and global manufacturing.
   • Eurozone GDP and inflation data.

4. Central Bank Meetings:

   • Federal Reserve (Fed): Expected to hold steady but may hint at a September rate cut. Futures are fully priced for a quarter-point easing and imply a 12% chance of a 50-basis-point cut, with 68 basis points of easing priced in by December.
   • Bank of Japan (BOJ): Markets imply a 70% chance of a 10-basis-point rate hike to 0.2%.
   • Bank of England (BOE): Investors are uncertain, with futures showing a 51% probability of a cut to 5%.

5. Earnings Reports:

   • Approximately 40% of the S&P 500 by market value will report earnings this week, including Microsoft, Apple, Amazon.com, and Meta Platforms.
   • High expectations mean any disappointment could impact valuations significantly.

6. Market Analysis:

   • Matt Britzman, senior equity analyst at Hargreaves Lansdown, stated, "US markets are approaching crunch time. This coming week could very well set the path for markets over the near term."
   • Chris Weston, head of research at Pepperstone, highlighted potential volatility due to sizeable moves implied by the options market for major tech companies.

7. Currency Markets:

   • The Japanese yen held on to recent gains, with the dollar rising just 0.1% to 153.84.
   • The euro eased 0.1% to US$1.084.

8. Gold Prices:

   • Gold rose 0.2% to US$2,390 an ounce, supported by the prospect of a dovish Fed.

9. Global Sentiment:

   • Wall Street's positive finish last Friday boosted investor sentiment.
   • The US Treasury will outline its bond sale plans for the quarter.
   • China's politburo meeting could reveal more stimulus following surprise rate cuts last week.

The week ahead is critical for markets, with central bank meetings, key economic data releases, and significant earnings reports likely to shape market movements and investor sentiment.