Global equities: start of second quarter results, positive results


The influx of data from central banks, governments and second quarter corporate results will decide market prices this week.
Image Credit: AP

Dubai: The second quarter earnings season kicks off in the coming week, with reports from US loan heavyweights JPMorgan Chase, Goldman Sachs and other major financial firms being released first.

Start of Q2 winning season

Profits for the world’s largest companies are expected to be up sharply this quarter, compared to a year ago, when economies were shut down due to the pandemic and business stopped.

Banks such as Wells Fargo, Bank of America, Citigroup and Morgan Stanley, among others, are expected to provide insight into their own performance in the second quarter, but also the ongoing recovery in the US economy.

US Consumer Price Index this Tuesday

On the economic front, the US consumer price index is due for release on Tuesday and retail sales are expected on Friday. CPI inflation rose at a higher annual rate than expected in May, and June could also be hot. The US Federal Reserve has said it will allow inflation to exceed its target level.

Elsewhere in the world, China’s GDP and the UK’s CPI are key economic events, along with major monetary policy decisions by the central banks of the Bank of Canada and the Bank of Japan.

Bank of Japan more likely to be accommodating

With Tokyo on lockdown, the Bank of Japan is more likely to be accommodating at its meeting later in the week, but the Bank of Canada and the Reserve Bank of New Zealand (RBNZ) both have reasons to be optimistic about their savings.

The RBNZ may look to raise interest rates later this year if the economy continues to perform well, so analysts will be watching for signs of optimism from these two commodity-focused central banks.

New COVID-19 fears trigger uncertainty

The global spread of the more infectious delta variant of the COVID-19 virus remains a critical area for traders.

The variant has now been identified in more than 100 countries, including those with high vaccination rates, and it has even forced Tokyo to declare a state of emergency and ban spectators from this month’s Olympics. as COVID-19 cases hit a 2-month high in the country. .

Is the market uncertainty back?

For traders who had written off the virus amid the widespread availability of vaccines, at least in the developed world, the setbacks caused by last week’s delta brought uncertainty that plagues market sentiment.

Analysts believe investors should expect the continued ebb and flow of the virus to stimulate traders’ appetite for risky assets for the rest of the year and beyond.

US bond yields fall

One of the most important indicators to watch is US government bond yields. The yield on the benchmark 10-year US Treasury bond fell 12 basis points last week, one of the worst weeklong declines in a year.

Traders fear that the Fed’s “transitional” view on price pressures is correct after all and that we have overcome fears of spike in inflation, even though inflation numbers for the next two months remain high.

Weak US bonds to help stocks

Continued weakness in US bond yields, if observed, would continue to support growth stocks, gold prices and the broader commodities complex, potentially at the expense of the US dollar.

The first half of 2021 has been a good start for the global economy and stock markets, but analysts believe the investment landscape is changing as the recovery has turned into expansion.

Will stock market dynamics continue?

Last week, readings of the U.S. labor market were released by the Federal Reserve amid growing uncertainties about COVID-19 variants and their implications for global growth.

As stocks posted another strong week, hitting new highs, the headline was the movement in interest rates, which fell significantly from their highs at the start of the year.

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