What is happening in the Global Week Ahead?

West European election fever runs almost as hot as the Euro 2024 football tournament.

• The 1st round of voting in France on Sunday was European stock market-moving, with the CAC-40 index up +1.6% in Monday trading.
• This week, the U.K. general election will be held on Thursday, July 4th. The vote results likely usher in the U.K.’s first center-left government in 14 years.

Alongside their political events, joint soccer football favorites France and England, along with hosts Germany, enter the final 16 of the Euros.

The coming global stock trading week also brings the U.S, stock market's favorite data point – Friday’s U.S. monthly nonfarm jobs and household unemployment data.

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

(1) Friday will showcase the U.S. nonfarm jobs data for June 2024.

Investors assessing when the Federal Reserve could start to cut interest rates will get a critical economic datapoint with the monthly U.S. jobs report released on July 5.

Economists are forecasting an increase of 180,000 jobs for the month of June. For May, non-farm payrolls increased by 272,000, far more than expected, underscoring the resilience of the labor market.

The Federal Reserve held rates steady last month and pushed out the start of rate cuts to perhaps as late as December, as officials look for more convincing signs that inflation is moderating to the central bank's target, or evidence that the employment market is worsening.

The latest Consumer Price Index (CPI) report showed U.S. consumer prices were unexpectedly unchanged in May.

(2) A watershed U.K. election on July 4th looms.

Polls predict a landslide British election win for the opposition Labour Party on July 4, boosting U.K. stocks and government bonds, as trade-weighted sterling has bounced back to levels not seen since 2016's Brexit vote.

Traders see a return to stability after heavy political turbulence during the Conservative Tory party’s 14-year rule and have speculated Labour leader Keir Starmer will rebuild trade links with Europe.

But Britain has vast fiscal challenges that neither Labour nor the Conservatives have clarified how they would solve, the Institute for Fiscal Studies think-tank said.

Economic growth is tepid, public debt-to-GDP has hit a 63-year high and taxation as a share of national income is approaching its highest since 1949.

If voters expect better public services without tax hikes and investors want government borrowing to stabilize, Starmer could find it tough to keep both sets of stakeholders on side.

(3) On Sunday, France went to the polls, in a 1st round of its snap election.

France went to the polls on Sunday. The 2nd round will be held next Sunday, July 7th.

In this 577-constituency race, candidates needed 12.5% of the vote to make it to the second round.

According to the Financial Times, responding to Sunday’s voting results, French centrist and leftwing parties raced against time on Monday to keep the Rassemblement National (RN) from power, despite the far-right party’s victory in the first round of parliamentary elections.

The RN’s opponents on the center and the left have until Tuesday to decide whether to pull candidates out of hundreds of election run-offs, after agreeing to limited electoral co-operation against Marine Le Pen’s party.

France’s blue-chip Cac 40 stock index rose +1.6%. Investors bet that the second round next weekend would deny the far right or far left a majority in the National Assembly. The euro gained 0.3 per to $1.075.

The RN came top in Sunday’s first-round election with 33.2% of the vote, ahead of the leftwing New Popular Front on 28% and President Emmanuel Macron’s Ensemble alliance on 22.4%.

The result was a political earthquake, and projections suggest the RN will still win the most seats in the run-off.

But its vote share combined with allies was lower than some had predicted last week.

(4) Global Mergers & Acquisitions volume? 2024 has not been impressive.

Global M&A volumes in the first half of 2024 have seen an uptick of 20% compared with 2023, and deals exceeding $5 billion have surged by 53%, according to data provided by Dealogic.

But for some dealmakers the glass is only half full.

Despite the recovery, deal volumes as of June 24 remain 15% below the last decade's average, largely impacted by the slowest Q2 in the Asia-Pacific region since 2009.

The number of deals announced in Q2-24 is the lowest of the past 16 years, even worse than in Q2-20, when COVID-19 forced a worldwide pause in M&A activity.

The remainder of the year looks bleak, with upcoming elections in France, Britain and particularly in the U.S. causing corporate boards and private equity funds to reconsider their decisions.

Some investment bankers are wondering whether they should focus on 2025 instead, a year they finally hope will deliver the goods.

(5) Consumer Inflation readings come out in Emerging Asia.

Inflation readings across countries in emerging Asia scatter the data calendar, though with consumer prices seemingly coming to heel for most economies it begs the question of how much longer policymakers will need to keep rates higher for.

Yet their hands are tied, with a foot-dragging Federal Reserve and a towering dollar leaving little to no room for any imminent rate cuts in Asia.

It's that or running the risk of their currencies getting hammered further.

In Thailand, that dissonance has sparked a months-long spat between the central bank and government.

The latter insists an urgent rate cut would revive Southeast Asia's second-largest economy, while the Bank of Thailand (BOT) has said rates remain appropriate.

BOT Governor Sethaput Suthiwartnarueput speaks to the media on Thursday, and will likely reiterate the central bank's stance.

Zacks #1 Rank (STRONG BUY) Stocks

(1) Williams Sonoma (WSM Quick QuoteWSM - Free Report) : This is a $287 a share stock, with a market cap of $18.5B. It is found in the U.S. Retail-Home Furnishings industry. I see a Zacks Value score of B, a Zacks Growth score of A and a Zacks Momentum score of B.

Image Source: Zacks Investment Research

Headquartered in San Francisco, CA, Williams-Sonoma, Inc. is a multi-channel specialty retailer of premium quality home products. Incorporated in 1973, the company has five brands and each of the brands is are operating segments.

• Pottery Barn (accounting for 41.4% of fiscal 2023 total revenues) is the largest brand of the company and offers premium quality furniture, lighting, tabletop, outdoor and decorative accessories.
• West Elm (23.9%) produces personalized products designed by the company’s team of artists and designers.
• Williams-Sonoma (16.2%) offers cookware, tools, cutlery, electrics, tabletop and bar, outdoor, furniture and cookbooks.
• Pottery Barn Kids and Teen (13.7%) deals with products used for putting up nurseries, bedrooms and play spaces. It also caters to the teenage population with furniture, bedding, lighting and decorative accents for teen bedrooms, dorm rooms, study spaces and lounges.
• Other segment (4.8%) primarily consists of international franchise operations, Rejuvenation and Mark and Graham. Rejuvenation offers premium quality products that are inspired by history and manufactured in facilities in Portland, OR. Mark and Graham are known for personalized gift items. The brand manufactures women’s and men’s accessories, home décor as well as seasonal items.

(Note:  Zacks identifies fiscal years by the month in which the fiscal year ends, while WSM identifies their fiscal year by the calendar year in which it begins; so comparable figures for any given fiscal year, as published by WSM, will refer to this same fiscal year as being the year before the same year, as identified by Zacks).

(2) Chewy (CHWY Quick QuoteCHWY - Free Report) : This is a $29 a share stock, with a market cap of $12.6B. It is found in the U.S. Consumer Products-Staples industry. I see a Zacks Value score of F, a Zacks Growth score of A and a Zacks Momentum score of A.
 

Image Source: Zacks Investment Research

Chewy Inc. operates as an online pet retailer.

The company offers pet products which include dry and wet food, toys, mats, biscuits, vitamins and supplements.

Chewy Inc. is based in Dania Beach, Florida.

(3) Wingstop (WING Quick QuoteWING - Free Report) : This is a $426 a share stock, with a market cap of $12.5B. It is found in the U.S. Retail-Restaurants industry. I see a Zacks Value score of F, a Zacks Growth score of A and a Zacks Momentum score of F.

Image Source: Zacks Investment Research

Wingstop Inc. franchises and operates restaurants.

The company's operating segment consists of Franchise segment and company segment. It offers cooked-to-order, hand-sauced and tossed chicken wings.

Wingstop Inc. is headquartered in Dallas, Texas.

Key Global Macro

Thursday’s U.K. general election is the big political event in the coming week.

Friday’s U.S. nonfarm payroll report for June is the most important macro print.

On Monday, the U.S. ISM manufacturing PMI for June is out, missing expectations of around 49% to 48.5%, and 20 basis points (bps) below the period month’s print of 48.7%.

On Tuesday, the flash Euro Area consumer inflation rate for June is out. Consensus sees +2.4% y/y, while the prior reading is +2.6% y/y.

Fed Chair Powell gives a speech.

U.S. JOLTs job openings for May should be 7.9 million. The prior month’s reading was 8.06 million.

On Wednesday, U.S. ADP private job additions for the month of June should be +170K, stronger than the +152K seen in May.

On Thursday, the U.K. general election happens. U.S. markets are closed for Independence Day.

On Friday, U.S. nonfarm payroll additions for June should be +180K, following a +282K print in May. The U.S. household unemployment rate should remain fixed at 4.0%.

Conclusion

Finally, Zacks Research Director Sheraz Mian’s four key Q2 earnings season points, out on June 26th, 2024—

Yes, the Q2 calendar for 2024 is behind us.

(1) The setup for the Q2-24 earnings season, whose early reports have started trickling in, is one of continued resilience coupled with a steadily improving outlook.

Given the favorable revisions trend ahead of this reporting cycle, Zacks will be looking for further improvement in the earnings outlook.

(2) For Q2-24, S&P500 earnings are expected to be up +8.2% from the same period last year on +4.6% higher revenues.

This will be the highest earnings growth rate since the +9.9% growth rate in the first quarter of 2022.

(3) Earnings growth for the Energy sector is on track to turn positive in Q2-24, after remaining in negative territory over the preceding four quarters.

(4) Q2 earnings for the ‘Magnificent 7’ companies are expected to be up +25.5% from the same period last year, on +13.1% higher revenues.

Excluding the ‘Mag 7’? Q2-24 earnings growth for the rest of the S&P500 index drops to +4.6% (from +8.2%).

Q2-24 earnings growth for the S&P500 index drops to +5.6% from +8.2%, if the Zacks Tech sector’s +15.5% growth is excluded.

All in all, Zacks thinks that Q2-24 earnings season will look and feel like Q1 earnings season, but deliver better growth metrics.

A strong Tech and Mag 7 earnings expansion continues to lift the all-important U.S. stock market.

Have an excellent trading week.

Warm regards,

John Blank, PhD.
Zacks Chief Equity Strategist and Economist