This Global Week Ahead ends with the latest July U.S. nonfarm jobs data.

Stock traders must factor in macro cooling across a full range of economies.

This implies U.S. post-COVID job adds slow down.

A natural gas supply shock, brought on explicitly by an aggressive Russia, can take Europe’s macro data further, into recessionary readings.

This week, the U.K.’s Bank of England, and the Reserve Bank of Australia, possibly opt for 50 basis-point rate hikes.

Elsewhere, the Bank of Brazil likely goes with a 75-bps hike. A tardy Bank of India should do 75-bps more by year’s end.

Edgy traders can punish stock indexes in a country, if they note a weak central bank.

One that fails to take the tough decisions, to slow a multi-decade high showing up in consumer price inflation.

A lift-off seen everywhere.

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

(1) On Friday, the latest July U.S. nonfarm jobs print hits the tape.

A barrage of FOMC rate hikes is slowing U.S. house price growth and forcing consumers to tighten their belts.

Friday's non-farm payrolls data will show whether it is also impacting the red-hot U.S. employment market.

Given the Fed now favors a data-dependent approach over explicitly guiding markets on policy, the jobs figures and other numbers due over the next eight weeks until the next Fed meeting, carry added importance.

Employers are already becoming less enthusiastic on taking on staff, with corporations from Tesla to Goldman Sachs warning of slower hiring.

Analysts polled by Reuters estimate +255K jobs were added last month, following June's forecast-beating print of +372K.

A far smaller number may bolster the view that the Fed has reached "peak-hawkishness."

(2) A European recession, brought on by gas shortages, may arrive by early 2023.

Even as Europe confronts record-high temperatures, gas shortages have got officials bracing for a cold, dark winter.

Russia's Gazprom has cut flows through the Nord Stream 1 pipeline to a fifth of capacity, and the EU is urging members to curb usage and store gas for winter.

European gas prices are up almost 200% so far this year and the longer this shock continues, the worse economies will fare.

With Germany's mighty industrial complex accounting for 36% of the country's gas demand, business activity is slowing there and consumer confidence has hit record lows.

Eurozone recession may arrive by early-2023, JPMorgan warns.

(3) On Tuesday, the Reserve Bank of Australia (RBA) surely raises policy rates.

Traders have eased off bets on a 75 bps Australian rate hike at Tuesday's Reserve Bank meeting.

But with inflation at the hottest in 21 years, a half-point hike looks like a done deal.

Latest data showed consumer prices climbing at a 6.1% annual pace, more than double the 2-3% target, and double the pace of wage growth. And Treasurer Jim Chalmers warns it will get worse before it gets better.

RBA Governor Philip Lowe has indicated rates, currently at 1.35%, will rise toward a "neutral" level of at least 2.5%, though markets expect them to top out at 3.75%.

Initially wrong-footed by flaring inflation, Lowe has overseen three consecutive hikes since May - the most aggressive action in decades.

That tardiness, and the way it communicated its intentions, have prompted a government probe into RBA policies and governance.

(4) On Thursday, Aug. 4th, the Bank of England (BoE) delivers its policy message.

The Bank of England started early, but has raised rates in smaller steps than its peers which are tightening policy in 50, 75 and even 100 basis-point increments.

But a half-percentage point rise to 1.75% is possible on Aug. 4th, which would be the biggest since 1995.

JPMorgan and HSBC are among those predicting a 50 bps move. While only three BoE policymakers favored 50 bps at the last two meetings, data since then has shown inflation reaching 9.4%, a 40-year high. It could hit 12% by October - six times the BoE target.

Governor Andrew Bailey has pledged to act forcefully if needed. Yet, given the BoE sees barely any UK economic growth before 2025, a Reuters poll forecasts, by a slim margin, the BoE will stick with 25 bps.

The bank must then contend with the risk that a smaller hike triggers a sterling selloff, further fanning inflation.

(5) Also on Thursday, the Brazilian central bank likely raise rates another 75 basis points. India likely does 75 bps by year’s end.

The four countries investors once grouped under the BRIC umbrella - Brazil, Russia, India and China - were always vastly different. That divergence shows up these days even in their relative monetary policy direction.

Uber-hiker Brazil, which jacked up rates by 1,125 basis points since March 2021, is expected to keep the benchmark at 13.35% when policymakers meet on Wednesday and leave it there for the remainder of 2022 before easing in 2023.

Meanwhile for India, a late entrant in the current round of global monetary policy tightening, the only way is up. The central bank intervened heavily in recent weeks to lift the rupee from a succession of record lows.

A Reuters poll predicts Indian policymakers, who meet on Thursday, will lift rates from the current 4.90% by another three-quarters of a percentage points by end-year.

Top Zacks #1 Rank (STRONG BUY) Stocks

I noted these three interesting large cap stocks entered our #1 list this week.

(1) Cadence Design Systems (CDNS Quick QuoteCDNS - Free Report) : A $184 a share price put on this chip and electronic design-assist firm, makes for a market cap of $50.3B. It is based in San Jose, CA. I see a Zacks Value score of F, a Zacks Growth score of A, and a Zacks Momentum score of B.

(2) Illumina (ILMN Quick QuoteILMN - Free Report) : This is a $213 a share life sciences (genetics sequencing) firm based in San Diego, CA. That makes for a market cap of $25.8B. I see a Zacks Value score of D, a Zacks Growth score of F, and Zacks Momentum score of F.

(3) Coupang (CPNG Quick QuoteCPNG - Free Report) : This is a $17 a share e-commerce firm, operating in South Korea. That makes for a market cap of $29.9B. I see a Zacks Value score of F, a Zacks Growth score of B, and Zacks Momentum score of B.

While each firm has an attractive, even sexy, business model, their Zacks Value scores of D and F are worrisome.

Key Global Macro

The week opens with a slew of manufacturing PMI data, given it is August 1st.

On Monday, the Caixin Manufacturing PMI for Mainland China should be 51.5 in July. The prior month, it was 51.7. This steady expansionary data feels manufactured to me.

The Euro Area S&P global manufacturing PMI for July should be 49.6. The prior month was 49.6. That is a soft contraction. It may end up much deeper, later this year.

The Euro Area household unemployment rate likely stays at 6.6% in July.

The U.S. ISM manufacturing PMI for July should be 52.9, after printing 53 the prior month.

On Tuesday, the Reserve Bank of Australia (RBA) should get its policy rate to 1.85% from 1.35%. That’s a 50-bps hike.

U.S. JOLTS job opening data for July should be 11M. The prior month was 11.254M.

On Wednesday, China’s Caixin services PMI comes out. The prior reading was 54.5.

The U.S. ISM services PMI for July should be 53.7. The prior was 55.3.

On Thursday, the Bank of England (BoE) should get to at least a 1.5% monetary policy rate, from 1.25% currently.

U.S. weekly jobless claims come out. The 4-week average to July 29th is 249.25K.

On Friday, the nonfarm job additions for July show a consensus for +260K on FX Street. The prior month’s job add data may be revised to +360K.

Consensus also sees the U.S. household unemployment rate holding steady at 3.6%.

Conclusion

On the Q2 earnings front, here is what Zacks Research Director Sheraz Mian wrote—

“Including the flood of earnings releases from this morning (July 28th), we now have Q2 results from 245 S&P500 members or 49% of the index’s total membership. On a market cap basis, the companies that have reported accounted for 55.8% of the index’s total market capitalization.”

“At this halfway point in the Q2 reporting cycle, total earnings for the S&P500 companies that reported are up +1.4% from the same period last year on +11% higher revenues.”

“75.5% beat EPS estimates and 65.7% beat revenue estimates. This is a lower beats percentage for this group of 245 index members relative to what we have seen from the group in other recent periods. In other words, fewer companies are able to beat consensus estimates relative to other recent periods and the magnitude of their beats are also smaller.”

“On top of:

• Inflation pressures, and
• Supply-chain challenges large corporations have dealt with for some time now.

We are also hearing a lot more about the:

• Negative impact of the strong U.S. dollar, and
• Signs of weakness at the lower-income level of consumers.”

That’s it for me.

Have a great trading week.

Warm Regards,

John Blank

Zacks Chief Equity Strategist and Economist