No Shortage Of Event Risk
Next week sees earnings season get underway in the US, with the major banks all reporting on the second quarter and offering insight – if they have any – into the rest of the year. Understandably, US corporates were a little shy on the guidance last quarter but investors may not be so willing to accept a repeat performance this time around, not while turning a blind eye to second-quarter performance.
The outlook remains murky but there are signs of promise, it’s possible that the bar is so low now that investors may leap on anything remotely positive and give these markets another kick higher, not that the Nasdaq is exactly in need of such a lift.
Geopolitical risk remains heightened, with China and Hong Kong at the center of the increasing hostilities. Speculation on around the direction of travel remains an ever-present risk, one that could escalate in a heartbeat. The fact that Trump is fighting an election in a few months probably doesn’t help the situation. Especially if the President wants to divert attention away from the rising number of COVID cases in a growing number of states.
United States
The big banks kick off earnings season and this time the focus might be more on job cut announcements, slashing of dividends, and ending of share buybacks. With around 80% entering this earnings season with no real guidance in place, investors will look for signs on how strong companies balance sheets are and whether they remain optimistic about the US consumer. JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C), and Wells Fargo (NYSE:WFC) report on Monday, while Goldman Sachs (NYSE:GS) delivers results on Wednesday. Bank of America (NYSE:BAC) and Morgan Stanley (NYSE:MS) report on Thursday morning and Netflix (NASDAQ:NFLX) reports after the close.
A slew of economic data should also show the US economic rebound continued in June. Retail sales are expected to remain strong following the biggest monthly increase ever. Regional surveys from NY and Philadelphia are also expected to show the recovery is heading in the right direction, but the further stimulus is still needed.
No major surprises are expected from the Fed’s Kaplan on Monday, Harker on Wednesday, and Evans on Thursday. The recovery will likely take a lot longer and policymakers will likely reiterate they are ready to act further if needed.
Markets
Oil
Oil is enjoying a summer break. It was an impressive recovery back to $40 but it’s been relatively uneventful since then. The $40 mark seems to be a widely accepted fair price for now, with WTI seeing resistance around $42 and support in the high 30’s. Similarly, Brent is seeing nice support around the $40 mark and resistance around $44. The fact that we’re seeing rising support may indicate that the path higher is still looking more plausible but many downside risks still remain, including second waves and a messy end to an otherwise successful coordinated production cut.
Gold
Gold is struggling to hang onto gains above $1,800, despite peaking around $1,817 on Wednesday. It’s held above since then but as we head into the end of the week, it’s coming under a little pressure and $1,800 is now being tested from the upside. A weekly close above $1,800 could be very technically significant for the yellow metal. A close below may be a red flag after a decent run for gold over the last month.