Week in a Glance: Fed & US GDP, Earnings Season, Eurozone GDP

2 Agu 2021

The past week turned out to be extremely eventful with all sorts of fundamental events of increased importance. The week began with a fall in the Chinese stock market, continued with the announcement of the results of the two-day FOMC Fed meeting, the publication of US and Eurozone GDP data, and all this was also accompanied by the peak of the reporting season, when the companies of the FAAMG group published their quarterly results.

Not to say that the week gave more answers than questions. Let's start with China. Information that the country wants to make educational services a non-profit business, coupled with earlier calls to ban the listing of Chinese companies abroad, provoked a powerful wave of sales in the Chinese stock market. And although the financial regulator, at a meeting with bankers and investors, tried as best he could to extinguish the panic wave, saying that everyone misunderstood, downward pressure remains prevailing, infecting other markets with negativity.

Even the US stock market last week failed to show everything it should have based on the results of the FOMC meeting and the reporting season. Everyone expected the Fed to admit the obvious last week - inflation was out of control and something had to be done about it. Instead, the US Central Bank launched an old record about unsustainable economic growth and the need to support the economy. In general, it is difficult to imagine more “pigeon” results of the FOMC meeting. But the reporting season, on the contrary, continued to delight and break records. Half of the SP500 index has already reported and 91% (!) of companies have exceeded analysts' profit forecasts. This is the best result since the 4th quarter of 2009.

Failure to grow positive seems almost like a condemnation to current prices in the US stock market. Since the data on US GDP, published last week (came out well below analysts' expectations: 6.5% against the forecast of 8.5%) showed that the peak of the recovery is likely to have been reached and it is not as high as it seemed. This means that in the foreseeable future we will expect weaker economic data. In this regard, it will be extremely interesting to observe the data on NPP, which are traditionally published on the first Friday of the month.

The eurozone, meanwhile, emerged from the recession, publishing very solid data on GDP growth rates.

In addition to statistics on the US labor market, the coming week will be interesting for the results of the meeting of the Bank of England, business activity indices from the US, data on the Canadian labor market and retail sales in the Eurozone. In general, it will not be boring.