The Global Week Ahead will likely shift its attention to U.S. Consumer Price Inflation (CPI) data out this week, on Wednesday.

Nevertheless, here are Zacks Research Director Sheraz Mian’s latest top Q2 earnings season points:

1. The picture emerging from the Q2 earnings season is one of all-around strength, with aggregate total quarterly earnings on track to reach a new all-time record and impressive momentum on the revenue side.

2. For the 378 S&P 500 members that have reported Q2 results already, total earnings are up +103.8% on +28.2% higher revenues, with 87.3% beating EPS estimates and 86.5% topping revenue estimates.

3. While the outsized earnings growth pace is mostly due to easy comparisons, primarily in the Finance sector, the performance on the revenue front (growth rate as well as beats percentage) is tracking above what we have been seeing in other recent periods.

4. For the Tech sector, we now have Q2 results from 85.1% of the sector’s market capitalization in the S&P 500 index. Total earnings for these Tech companies are up +66% from the same period last year on +26.3% higher revenues, with 96.2% beating EPS estimates and 94.3% beating revenue estimates.

5. For the Finance sector, now have Q2 results from 82.6% of the sector’s market capitalization in the S&P 500 index. Total earnings for these Finance companies are up +179.4% from the same period last year on +8.5% higher revenues, with 92.7% beating EPS estimates and 81.7% beating revenue estimates.

6. Excluding the unusually high Finance sector earnings growth, total Q2 earnings growth for the remainder of the index members that have reported results would be up +88.6% on +31.6% higher revenues.

7. Looking at Q2 as a whole, combining the actual results for the 378 index members that have reported with estimates for the still-to-come companies, total S&P 500 earnings are expected to be up +89.7% from the same period last year on +23.5% higher revenues, with the growth rate steadily going up as companies report better-than-expected results.

8. Looking at the calendar-year picture for the S&P 500 index, earnings are projected to climb +41.7% on +12.4% higher revenues in 2021 and increase +9.7% on +6.5% higher revenues in 2022. This would follow a decline of -1.7% in 2020.

9. The implied ‘EPS’ for the S&P 500 index, calculated using the current 2021 P/E of 23.1X and index close, as of August 3rd, is $191.77, up from $135.38 in 2020. Using the same methodology, the index ‘EPS’ works out to $210.47 for 2022 (P/E of 21.0X). The multiples have been calculated using the index’s total market cap and aggregate bottom-up earnings for each year.

Next are Reuters’ five world market themes, reordered for equity traders.

These are five events and themes likely to dominate global financial markets next week.

(1) On Wednesday, U.S. Consumer Price Inflation Is Out

U.S. consumer price data out on Wednesday will provide some answers to one of the most pressing questions in world markets at the moment: how sustainable is the current surge in U.S. inflation?

Last month's jump of 0.9% was the strongest gain since June 2008. May was pretty punchy too at 0.6%, and economists polled by Reuters think July's figure won't be far behind, at 0.5%.

The Federal Reserve's hawks are watching these figures… well, like hawks. Another hot number will bolster their case for the central bank reeling in stimulus sooner rather than later. That could cause summer squalls in the record high stock markets and the red hot bond markets.

(2) Chinese Data to Show Damage Caused by Government Crackdowns

Chinese data in the coming days should reveal how much damage Beijing’s regulatory crackdown, recent floods in Henan province and the new COVID-19 wave — both at home in and in nearby countries — are doing to the giant economy.

There could be contradictions. There is slowing credit growth from the crackdown on leverage and local government debt, along with exports cooling after a bumper second quarter. At the same time, Producer Price Inflation (PPI) will be watched to see if authorities' attempts to quell speculation are having much impact.

Headwinds to growth have spurred calls for further cuts to reserve requirements and even possibly policy rates, both in China and its neighborhood. Tourism-dependent Thailand’s currency is at 2018 lows, forcing the Bank of Thailand to turn dovish while the Philippines might copy China's lead on Thursday and cut it own bank reserve requirements.

(3) Tourism Stocks Now Lagging

Back in March, Morgan Stanley predicted another lost summer for tourism, surprising some, given the vaccine optimism at the time. Now in August, when beaches and cities are normally packed with holidaymakers, their call looks bang-on.

Spain welcomed 75% fewer tourists last month than in June 2019. Greek islands, billed as “COVID-free," are coming under travel curbs again, as well as suffering wildfires. Thailand's Phuket has just 1% of the visitors it had before the pandemic. Turkey's second-quarter tourism revenues were $3 billion, versus $8 billion in Q2 2019, while Kenya welcomed just 300,000 visitors in H1 compared to 2 million in 2019.

Given that tourism directly contributes 6% of European GDP and nearly 8% of employment, it's unsurprising the Eurozone services business expectations index has slipped to three-month lows and European travel shares have lost 13% since April. The Thai baht has slumped to its lowest since 2018. It's enough to make you need a holiday.

(4) COVID insurance Claims Not Adding Up to Big Bill. Here’s Why

Tried to get COVID insurance and failed? Most of Europe's big insurers have stripped cover for the pandemic from their policies, setting them up for much stronger results than last year, when the virus caught them unawares.

France's AXA and Italy's Generali and Germany's Allianz have notched good numbers already and next week sees the turn of Zurich, Dutch pair Aegon and NN and Britain's Aviva, M&G and Prudential.

And it is not only the COVID life insurance of business claims that will be of interest. Activist investor Cevian recently grabbed a 5% stake at Aviva, and Prudential is in the process of severing its U.S. arm after pressure from another corporate raider, Third Point.

(5) On Thursday, the African Nation of Zambia Votes

Zambia goes to the polls on Thursday in what looks like being a close-fought election between incumbent president Edgar Lungu and serial challenger Hakainde Hichilema, known as HH.

Analysts say it is likely to decided by young and first-time voters frustrated by an economy with the highest unemployment in 10 years and soaring living costs due to a collapsing currency.

It is also in default. A debt restructuring has been put on hold until after the election but it is not just any restructuring. It is supposed to be the first big test of the 'Common Framework' debt relief plan set up by G20 nations last year. They need Zambia to be a success so that other reluctant countries follow it, so whoever wins the election will be firmly in the spotlight.

Top Zacks #1 Rank (STRONG BUY) Stocks

I am seeing a large number of mining stocks on our #1 list these days.

(1) BHP Group (BHP Quick QuoteBHP - Free Report) : This is a $77 Australian mining stock with a market cap of $113.4B. I see a Zacks Value score of B, a Zacks Growth score of C, and a Zacks Momentum score of D. This stock has been stuck in a range since early March.

(2) VALE (VALE Quick QuoteVALE - Free Report) : This is a $21 Brazilian iron ore stock with a market cap of $107.6B. I see a Zacks Value score of A, a Zacks Growth score of B and a Zacks Momentum score of A. Share prices here haven’t moved up since early May.

(3) Glencore (GLNCY Quick QuoteGLNCY - Free Report) : This is a $9 Swiss-headquartered mining stock with a $59.5B market cap. I see a Zacks Value score of A, a Zacks Growth score of A, and a Zacks Momentum score of D. Again, the high this year was seen in early May, but the chart is more constructive.

The bull/bear question: Is all the good commodity pricing news already priced in?

Key Global Macro

Before markets opened in the USA, we got China’s PPI for July.

That was up +9.0% y/y, the National Bureau of Statistics said early Monday. It was due to sharp price hikes in crude oil and coal. In the first 7 months of 2021, it grew +5.7%.

China’s CPI, however, rose only +1.0% y/y.

That data will set the tone for global views on intermediate and likely commodity prices.

On Monday, U.S. JOLTS job opening data should show 9.4 million openings.

On Tuesday, we get China’s Foreign Direct Investment FDI (+28.7% in a y/y prior reading), New Loans (1,200B), and M2 money supply (+8.6% y/y growth) data. Interesting to note M2 growth is equal to PPI increases there.

U.S. NFIB small business optimism comes out. 102.5 was the prior reading.

On Wednesday, the U.S. CPI for July should be up +5.3% y/y, and the core CPI should be up +4.3% y/y.

On Thursday, the U.S. PPI ex-food & energy should be up +5.7% y/y in July.

On Friday, U. of Michigan consumer sentiment should be up to 82 from 81.2.

Conclusion

Don’t be fooled.

The 10-yr U.S. Treasury pricing at 1.28% entering the Global Week Ahead is NOT a proxy for the core U.S. CPI.

This low a 10-yr U.S. Treasury rate is pricing in ‘safe haven’ flows from outside the USA, on global growth worries, and on the likelihood of the Fed’s “QE” tapering happening soon.

All in all, it will still be interesting to note the stock market reaction to the U.S. CPI data.

Regards,

John Blank