Five Things to Watch in the Markets This Week – Introduction
This week, traders will focus mostly on the rhetoric, rather than the economic data because there is not much economic data expected. In this article, I will provide a summary of what to expect in the markets this week.
Trade Conflict Goes On
Late last week, the United States started imposing tariffs on a number of goods from China. The tariffs are due to what the president calls the unfair treatment of the United States by China and other countries. Soon after the tariffs went into place, China retaliated with tariffs of its own. The latter tariffs were imposed in a coordinated way that will hurt specific places where Trump won the election. This week, Trump could announce fresh tariffs on Chinese goods. This will lead to fresh tariffs from China.
This week, Trump will leave for Europe where he is expected to meet with his counterparts from NATO, Europe, and Asia. While all of his colleagues will be present, Trump will be the main focus. Traders and analysts are waiting to see how he will behave in these meetings, which come before his one on one meeting with Russia’s Vladmir Putin. In addition, he will travel to the UK, where he is expected to meet with the queen, the prime minister, and other UK business leaders.
This week, the earnings season will kick off officially in the United States. The earnings season is basically the period where companies release their quarterly earnings. It will kick off with top banks like Citi, JP Morgan, and Wells Fargo, which will report on Friday. In this quarter, earnings are expected to grow by 20.7%, which will be a slightly slower from 26.7% in the first quarter. Last quarter’s number was the highest in seven years. Traders will want to know whether the growth momentum will continue.
The economic calendar will not be very busy this week, with the United States not releasing major data. On Monday, Switzerland will release the unemployment numbers, which will come a week after the country released encouraging inflation numbers. Traders expect the unemployment number to drop to 2.5% from last month’s 2.6%. On the same day, traders will listen to an important speech by ECB’s Mario Draghi. They will also get Germany’s export and import data.
On Tuesday, the UK will release the manufacturing data. This is an important data which shows the performance of the manufacturing industry. Traders expect the manufacturing index to grow by 1.0% which will be better than last month’s slump of 1.4%. They will also get the ZEW economic sentiment from Germany and the US JOLTS jobs openings.
On Wednesday, the Bank of Canada will release its interest rate decision. Traders will watch out for their statement, coming a few days after the country’s employment numbers beat analysts’ forecasts. They will also listen to Mario Draghi and UK’s Mark Carney. On Thursday, they will read the minutes from the European Central Bank’s meeting. On Friday, there will be no major economic data.
On Friday, Theresa May met with her cabinet and came to a consensus on her Brexit strategy. This week, traders will wait for the developments both from the parliament and from the European Union side. Already, Foreign Minister Boris Johnson has strongly opposed the PM’s proposals.