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To start off this Global Week Ahead, let’s review the latest Q1-22 earnings season data.
According to Zacks Research Director Sheraz Mian, on May 4th, 2022 —
“With respect to the Q1 earnings season scorecard, we now have results from 417 S&P500 members, or 83.4% of the index’s total membership.
"Total earnings for these companies are up:
+8.6% from the same period last year on
+14.9% higher revenues, with
80.6% beating EPS estimates, and
75.8% beating revenue estimates
“Excluding the -16.3% decline in Finance sector earnings, Q1 earnings for the rest of the index members that have reported would be up +15.4%.
“On the flip side, the +202.1% increase in Energy sector earnings is boosting the aggregate growth picture. Excluding the Energy sector, Q1 earnings growth drops to +2.6%.”
Next are Reuters’ five world market themes, reordered for equity traders—
(1) Red-hot Inflation Infusing Central Bankers with Sense of Urgency
The Fed delivered its biggest rate rise in 22 years, Australia hiked by more than expected and India weighed in with an out-of-meeting move.
But the policy tightening rush is adding to the storm clouds gathering over the world economy, hit by soaring food and energy prices, war in Ukraine and China's COVID curbs. The Bank of England, while raising rates, also flagged recession risks.
Germany's ZEW sentiment index and preliminary Q1 UK GDP data will highlight the tightrope central banks are walking. And in emerging markets, Mexico, Peru, Malaysia and Romania are likely to confirm that the rate hike cycle continues.
How to dampen inflation without slamming the brakes on growth? That's the tricky job central banks face. But as others grapple with soaring prices, we will see how hard China's COVID lockdowns are snarling up trade and slowing its economy.
And another complication -- M&A deals worth over $400 billion are waiting for financing, but costs are rising fast.
(2) On Wednesday, April U.S. Consumer Price Inflation (CPI) Released
Is U.S. inflation peaking after the fastest surge in over 40 years? The April consumer price index, due on Wednesday, will show.
March CPI came in at 8.5% on an annualized basis, as gasoline costs hit record highs. On a monthly basis, CPI jumped 1.2%, the biggest gain since September 2005.
Early forecasts are for a 0.2% monthly rise.
The March inflation surge probably sealed the Fed's 50 basis-point rate rise on May 4th.
The upcoming inflation print could sway expectations for how monetary policy will be adjusted going forward.
(3) When Do COVID Lockdowns End in China?
China's anti-COVID lockdowns give every indication of stretching through the spring.
Alongside the strain on tens of millions of people, damage to the economic outlook — in China and globally — is immense.
And markets' patience with limited policy support is wearing thin. If trade figures.
Iron ore, oil and copper prices are already wavering. In the teeth of a steep U.S. hiking cycle, the slowdown also bodes ill for the wobbling Chinese yuan and in turn, for the foreigners who have placed their money in local markets.
(4) May 9 Celebrations Happen in Wartime Russia
Banning Russian oil imports seems to be a question of when, not if, for the European Union. The bloc is close to agreeing its sixth and fiercest package of sanctions against Moscow for invading Ukraine, according to the bloc's top diplomat.
The centerpiece of the package is a phased embargo on Russian oil, which makes up over a quarter of EU imports. The move will push European refineries into a race to find new crude suppliers and leave drivers with bigger bills at the pump at a time when the cost-of-living crisis is squeezing consumers globally.
Meanwhile, Russia will hold the annual May 9 Victory Day in Moscow to mark the anniversary of the Soviet Union's triumph over Nazi Germany. The Kremlin dismissed speculation that President Vladimir Putin planned to declare war against Ukraine and a national mobilization on the highly symbolic day.
(5) Global M&A Dealmaking Recovers
Global dealmaking is recovering after a first-quarter slump caused by Russia's invasion of Ukraine.
April M&A rose 30% from March to $387 billion, and included mega deals such as Elon Musk's $44 billion buyout of Twitter and a 58 billion-euro ($61.04 billion) bid by a consortium for Italian airport and motorway operator Atlantia.
Now the M&A market faces another challenge: funding.
Globally, more than $400 billion worth of deals have been announced since January but not completed, Refinitiv data shows.
M&A deals typically include 'staple financing,’ a pre-arranged package offered to potential purchasers to finance the acquisition. Once the deal is agreed, the buyer can syndicate the financing, inviting other banks to join. Or it can tap bond or equity markets.
But funding costs have spiraled since the deals were agreed upon. Average global corporate debt yields have soared 100 basis points since the Feb. 24 invasion, and by 150 bps on junk-rated U.S. companies, ICE BofA indexes show.
That's left some enormous deals hanging. They include Microsoft's purchase of Activision Blizzard, Musk's Twitter acquisition and an investment by Macquarie and the British Columbia Investment Management into Britain's National Grid.
Top Zacks #1 Rank (STRONG BUY) Stocks
(1) Total Energies (TTE - Free Report) : This is a $53 a share French oil major, making for a market cap of $136.8B. I see a Zacks Value score of A, a Zacks Growth score of A and a Zacks Momentum score of B.
(2) Volkswagen (VWAGY - Free Report) : This is a $21 a share German automaker, making for a market cap of $105.6B. I see a Zacks Value score of A, a Zacks Growth score of F and a Zacks Momentum score of A.
(3) Airbnb (ABNB - Free Report) : This is the U.S. online vacation home booker. Shares trade at $143, making for a market cap of $91.8B. I see a Zacks Value score of F, a Zacks Growth score of C and a Zacks Momentum score of A.
Key Global Macro
The macro scene is all about upstream Producer Price Inflation (PPI) and downstream Consumer Price Inflation (CPI) data this week.
On Monday, Mainland China exports for April came in at only +3% year over year, following the previous month's +14.7%. Imports were unchanged from the prio month's -0.1% y/y.
On Tuesday, the German ZEW surveys are out for May. Current situation looks to be -42.5, worse than the prior reading at 30.8. Economic sentiment looks to be 40.4, in line with the prior -41 reading.
The Fed’s Williams, Barkin, Waller, Mester and Bostic makes speeches. To no one’s surprise, the U.S. CPI data hits the day after.
On Wednesday, Mainland China’s Producer Price Index (PPI) for April comes out. Look for a decline to +6.5% y/y from +8.3% y/y. That is a needed decline in order for the world’s CPI rates to fall.
Germany HICP consumer price inflation rate for April should be +7.4% y/y, the same as in March. At least this number should not be not rising this month!
The U.S. CPI ex-food & energy should be +6.0% y/y in April, down from +6.5% y/y in March. Again, that will be welcome macro news.
The broad U.S. CPI should be +8.4% y/y, down a notch from +8.5% y/y the month prior.
On Thursday, Australia’s Consumer Inflation Expectations for May should be +4.8% y/y, down from +5.2% y/y in April.
The U.S. Producer Price Index (PPI) for April should be red hot at +12.2% y/y, up from +11.2% y/y the month prior.
On Friday, University of Michigan consumer sentiment should be very low again, at 66.5, but a notch above the prior reading at 65.2.
Conclusion
This week’s macro data prints I listed show: This Global Week Ahead will be focused on Consumer and Producer Price Inflation data.
If the latest April data does show a beginning of lower CPI and PPI rates of inflation, the stock markets will sing a brighter tune.
Happy trading to all of you!
Warm Regards,
John Blank Zacks Chief Equity Strategist and Economist
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Watch the CPI Data: Global Week Ahead
To start off this Global Week Ahead, let’s review the latest Q1-22 earnings season data.
According to Zacks Research Director Sheraz Mian, on May 4th, 2022 —
“With respect to the Q1 earnings season scorecard, we now have results from 417 S&P500 members, or 83.4% of the index’s total membership.
"Total earnings for these companies are up:
“Excluding the -16.3% decline in Finance sector earnings, Q1 earnings for the rest of the index members that have reported would be up +15.4%.
“On the flip side, the +202.1% increase in Energy sector earnings is boosting the aggregate growth picture. Excluding the Energy sector, Q1 earnings growth drops to +2.6%.”
Next are Reuters’ five world market themes, reordered for equity traders—
(1) Red-hot Inflation Infusing Central Bankers with Sense of Urgency
The Fed delivered its biggest rate rise in 22 years, Australia hiked by more than expected and India weighed in with an out-of-meeting move.
But the policy tightening rush is adding to the storm clouds gathering over the world economy, hit by soaring food and energy prices, war in Ukraine and China's COVID curbs. The Bank of England, while raising rates, also flagged recession risks.
Germany's ZEW sentiment index and preliminary Q1 UK GDP data will highlight the tightrope central banks are walking. And in emerging markets, Mexico, Peru, Malaysia and Romania are likely to confirm that the rate hike cycle continues.
How to dampen inflation without slamming the brakes on growth? That's the tricky job central banks face. But as others grapple with soaring prices, we will see how hard China's COVID lockdowns are snarling up trade and slowing its economy.
And another complication -- M&A deals worth over $400 billion are waiting for financing, but costs are rising fast.
(2) On Wednesday, April U.S. Consumer Price Inflation (CPI) Released
Is U.S. inflation peaking after the fastest surge in over 40 years? The April consumer price index, due on Wednesday, will show.
March CPI came in at 8.5% on an annualized basis, as gasoline costs hit record highs. On a monthly basis, CPI jumped 1.2%, the biggest gain since September 2005.
Early forecasts are for a 0.2% monthly rise.
The March inflation surge probably sealed the Fed's 50 basis-point rate rise on May 4th.
The upcoming inflation print could sway expectations for how monetary policy will be adjusted going forward.
(3) When Do COVID Lockdowns End in China?
China's anti-COVID lockdowns give every indication of stretching through the spring.
Alongside the strain on tens of millions of people, damage to the economic outlook — in China and globally — is immense.
And markets' patience with limited policy support is wearing thin. If trade figures.
Iron ore, oil and copper prices are already wavering. In the teeth of a steep U.S. hiking cycle, the slowdown also bodes ill for the wobbling Chinese yuan and in turn, for the foreigners who have placed their money in local markets.
(4) May 9 Celebrations Happen in Wartime Russia
Banning Russian oil imports seems to be a question of when, not if, for the European Union. The bloc is close to agreeing its sixth and fiercest package of sanctions against Moscow for invading Ukraine, according to the bloc's top diplomat.
The centerpiece of the package is a phased embargo on Russian oil, which makes up over a quarter of EU imports. The move will push European refineries into a race to find new crude suppliers and leave drivers with bigger bills at the pump at a time when the cost-of-living crisis is squeezing consumers globally.
Meanwhile, Russia will hold the annual May 9 Victory Day in Moscow to mark the anniversary of the Soviet Union's triumph over Nazi Germany. The Kremlin dismissed speculation that President Vladimir Putin planned to declare war against Ukraine and a national mobilization on the highly symbolic day.
(5) Global M&A Dealmaking Recovers
Global dealmaking is recovering after a first-quarter slump caused by Russia's invasion of Ukraine.
April M&A rose 30% from March to $387 billion, and included mega deals such as Elon Musk's $44 billion buyout of Twitter and a 58 billion-euro ($61.04 billion) bid by a consortium for Italian airport and motorway operator Atlantia.
Now the M&A market faces another challenge: funding.
Globally, more than $400 billion worth of deals have been announced since January but not completed, Refinitiv data shows.
M&A deals typically include 'staple financing,’ a pre-arranged package offered to potential purchasers to finance the acquisition. Once the deal is agreed, the buyer can syndicate the financing, inviting other banks to join. Or it can tap bond or equity markets.
But funding costs have spiraled since the deals were agreed upon. Average global corporate debt yields have soared 100 basis points since the Feb. 24 invasion, and by 150 bps on junk-rated U.S. companies, ICE BofA indexes show.
That's left some enormous deals hanging. They include Microsoft's purchase of Activision Blizzard, Musk's Twitter acquisition and an investment by Macquarie and the British Columbia Investment Management into Britain's National Grid.
Top Zacks #1 Rank (STRONG BUY) Stocks
(1) Total Energies (TTE - Free Report) : This is a $53 a share French oil major, making for a market cap of $136.8B. I see a Zacks Value score of A, a Zacks Growth score of A and a Zacks Momentum score of B.
(2) Volkswagen (VWAGY - Free Report) : This is a $21 a share German automaker, making for a market cap of $105.6B. I see a Zacks Value score of A, a Zacks Growth score of F and a Zacks Momentum score of A.
(3) Airbnb (ABNB - Free Report) : This is the U.S. online vacation home booker. Shares trade at $143, making for a market cap of $91.8B. I see a Zacks Value score of F, a Zacks Growth score of C and a Zacks Momentum score of A.
Key Global Macro
The macro scene is all about upstream Producer Price Inflation (PPI) and downstream Consumer Price Inflation (CPI) data this week.
On Monday, Mainland China exports for April came in at only +3% year over year, following the previous month's +14.7%. Imports were unchanged from the prio month's -0.1% y/y.
On Tuesday, the German ZEW surveys are out for May. Current situation looks to be -42.5, worse than the prior reading at 30.8. Economic sentiment looks to be 40.4, in line with the prior -41 reading.
The Fed’s Williams, Barkin, Waller, Mester and Bostic makes speeches. To no one’s surprise, the U.S. CPI data hits the day after.
On Wednesday, Mainland China’s Producer Price Index (PPI) for April comes out. Look for a decline to +6.5% y/y from +8.3% y/y. That is a needed decline in order for the world’s CPI rates to fall.
Germany HICP consumer price inflation rate for April should be +7.4% y/y, the same as in March. At least this number should not be not rising this month!
The U.S. CPI ex-food & energy should be +6.0% y/y in April, down from +6.5% y/y in March. Again, that will be welcome macro news.
The broad U.S. CPI should be +8.4% y/y, down a notch from +8.5% y/y the month prior.
On Thursday, Australia’s Consumer Inflation Expectations for May should be +4.8% y/y, down from +5.2% y/y in April.
The U.S. Producer Price Index (PPI) for April should be red hot at +12.2% y/y, up from +11.2% y/y the month prior.
On Friday, University of Michigan consumer sentiment should be very low again, at 66.5, but a notch above the prior reading at 65.2.
Conclusion
This week’s macro data prints I listed show: This Global Week Ahead will be focused on Consumer and Producer Price Inflation data.
If the latest April data does show a beginning of lower CPI and PPI rates of inflation, the stock markets will sing a brighter tune.
Happy trading to all of you!
Warm Regards,
John Blank
Zacks Chief Equity Strategist and Economist