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Final Quarter of 2024 Begins: Global Week Ahead

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In the Global Week Ahead, world markets enter this year’s final quarter.

Global financial markets are fizzing with anticipation – from a drop in global interest rates – after the high-rate levels endured over the past few years.

The only question?

Whether U.S. and world economic growth drops off as quickly, or gently slows.

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

(1) On Monday, Q3-24 ends. The quarter has been a chaotic period. What’s next?


The third quarter (Q3-24) draws to a close on Tuesday, after a tumultuous few months.

August 2024 saw widespread turmoil when the normally docile Japan yen went wild, at almost exactly the same time that the ‘Mag 7’ tech bulls broke down, and the top central banks started to fret again about their economies.

Stocks have largely overcome their lurches since:

 

  • The Japanese yen is about to clinch its best quarterly performance since the 2008 global financial meltdown
  • Benchmark global borrowing costs — and oil — are both down almost -15% and 
  • Mainland China is opening the stimulus spigots


So, roll on the final leg of the year, which will be dominated by November's U.S. election between Donald Trump and Kamala Harris.

But that should be quiet, right?
 

(2) On Friday, Oct. 4th, traders get to review SEPT U.S. Nonfarm Payroll data.


The U.S. Fed kicked off its rate-cutting cycle, with a 50-basis point reduction, on Sept. 18th.

But employment continues to be a focal point for investors, gauging how rapidly the central bank will need to cut monetary policy in coming months.

Market participants are keen to see whether Friday’s data will support Fed Chairman Jerome Powell’s sunny outlook for cooling inflation and resilient growth, a key factor behind the markets' surge to new highs following the central bank’s meeting.

Softness in the U.S. labor market could revive fears that an economic downturn may be imminent, while unexpectedly strong jobs growth may stir worries that the Fed will not cut rates as deeply as expected as it seeks to avoid an inflation flare-up.

Economists polled by Reuters expect the U.S. economy to have created a median of +145K jobs in September, versus +142K in August.
 

(3) On Monday, fresh Mainland China PMI factory activity data comes out.


Factory activity PMI data in China is due on Monday, across both the official (NBS) and private (Caixin) sector surveys.

It comes out just a week after the country unveiled its most aggressive stimulus package since the pandemic to shore up its ailing economy.

Of course, it'll be too early to see the effects of the measures — ranging from outsized rate cuts to support for stocks — on the Mainland China economy just yet.

But given the wave of optimism that's swept across global markets in the wake of Beijing's announcement, perhaps investors may for once look past Monday's likely dismal numbers.

While the release of Mainland China's purchasing managers' index (PMI) data headlines the economic calendar in Asia, in Thailand a meeting between the country's government and central bank will also be of note.

The two will discuss the domestic inflation target and the recent strength of the baht, having been at loggerheads over delivering a rate cut for months now.
 

(4) On Tuesday, important Eurozone consumer inflation HICP data comes out.


Eurozone inflation numbers due on Tuesday will be under close scrutiny, as the ECB decides whether to cut rates again in October.

In both France and Spain, consumer prices rose less than expected in September, by +1.5% and +1.7%, respectively.

Economists reckon the overall Eurozone print fell below the ECB's 2% target for the first time since June 2021 thanks to lower energy prices, though it's expected to rise again in the final months of the year.

Investors now see over a 50% chance of a 25 basis-point October rate cut they thought was unlikely just last week as Eurozone business activity unexpectedly contracted in September, stoking fears the ECB is behind the curve.

Dovish policymakers are now preparing to fight for that cut. Hawks are likely to resist.

Traders see inflation falling much faster than the ECB expects.
 

(5) Keep an eye out for consumer macro reports on the United Kingdom.


In the race towards neutral rates, the Bank of England (BoE) is trailing well behind the likes of the Federal Reserve and the European Central Bank (ECB).

Markets show traders believe the BoE is almost certainly going to cut rates far more slowly than most other major central banks.

Upcoming data on second-quarter U.K. GDP is unlikely to sway the hand of policymakers in London, who are still concerned about pockets of persistent inflation in the economy.

The new U.K. Labour government has sounded the alarm about the dire state of Britain's finances — something October's budget will seek to address — and consumers are at their most miserable for six months as a result.

U.K. macro figures, due in the coming week, on mortgage lending and consumer credit, might provide some much-needed cheer.
 

Zacks #1 Rank (STRONG BUY) Stocks


(1) Fortinet (FTNT - Free Report) : This is an important Internet Software industry cybersecurity stock. It shows a $77 share price, and a $59B market cap. The Zacks Value score is F, the Zacks Growth score is C, and the Zacks Momentum score is A.

 

Zacks Investment Research
Image Source: Zacks Investment Research

Headquartered in Sunnyvale, CA, Fortinet, Inc. is a provider of network security appliances and Unified Threat Management (UTM) network security solutions to enterprises, service providers and government entities worldwide.

Its solutions are designed to integrate multiple levels of security protection, including firewall, virtual private networking (VPN), antivirus, intrusion prevention (IP), web filtering, anti-spam and wide-area network (WAN) acceleration.

Through its products and subscription services, the company provides integrated protection against dynamic security threats while simplifying the IT security infrastructure.

Its solutions incorporate application-specific integrated circuits, hardware architecture, operating system, and associated security and networking functions to defend against multiple categories of IT security attacks without impacting network performance.

The company’s network security gateways protect customer data, reduce security complexities and lower the total cost of ownership.

Customers are able to implement their security policies on traffic between internal networks and the Internet, as well as between internal and private networks shared with partners.

Its flagship UTM solution consists of the FortiGate appliance product line and FortiGuard security subscription services.

Its products and services are sold through a network of more than 20,000 channel partners worldwide, including distributors, resellers, value-added resellers and managed service providers.

The company caters to more than 450,000 customers worldwide, including most of the Fortune 100 companies.

Fortinet reported revenues of $5.3 billion in 2023, which increased 20.1% from 2022. Product revenue was $1.93 billion, up 8.2% while Service revenue of $3.38 billion improved 28.1% year over year in 2023.

The company faces significant competition with Palo Alto Networks, CyberArk, Qualys and Cisco in the network security as well as cloud security space.

(2) Flutter Entertainment PLC (FLUT - Free Report) : This is a Consumer Discretionary - Gaming stock. It shows a $243 share price, and a $43.3B market cap. The Zacks Value score is C, the Zacks Growth score is D and the Zacks Momentum score is C.

Zacks Investment Research
Image Source: Zacks Investment Research

Flutter Entertainment PLC is an online sports betting and iGaming operator.

Its divisions include the United States, United Kingdom and Ireland, Australia and International.

  • The U.S. division offers sports betting, casino, DFS and horse racing wagering products.
  • In the U.K. and Ireland (UKI), it offers sports betting, iGaming products and other products through its Sky Betting & Gaming, Paddy Power, Betfair and tombola brands.
  • In Australia, it offers online sports betting products through its Sportsbet brand.
  • The international division includes PokerStars, Betfair International, Adjarabet and Junglee Games.


Flutter Entertainment PLC is based in DUBLIN, Ireland.

(3) Swire Pacific (SWRAY - Free Report) : This is an Asia-Pacific Conglomerate stock. It shows a $8 share price, and a $59B market cap. The Zacks Value score is B, the Zacks Growth score is F and the Zacks Momentum score is F.

Zacks Investment Research
Image Source: Zacks Investment Research

Swire Pacific Ltd. is one of Hong Kong's leading listed companies, with diversified interests in five operating divisions: Property, Aviation, Beverages, Marine Services and Trading & Industrial.

From Wiki: “Swire Group is a highly diversified global conglomerate with its parent company being John Swire & Sons Limited that holds controlling stakes in a range of businesses trading in the U.K., USA, Australia, Papua New Guinea, East and West Africa, and across Southeast Asia:

  • Parent organization: John Swire & Sons Limited
  • CEO: Merlin Bingham Swire
  • Headquarters: London, United Kingdom
  • Founded: 1816
  • Subsidiaries: Swire Properties, Cathay Pacific, China Navigation Company, HAECO
  • Number of employees: 100,000+
  • Traded as: Swire Pacific Limited”


The company's operations are predominantly based in the Greater China region, where the Swire group has been established for over 130 years.

Swire Pacific seeks to foster long-term, sustainable growth through active participation in management, underpinned by a strong financial base.
 

Key Global Macro


Since Monday is the end of a month (SEPT), and a quarter (Q3-24), the early part of this trading week will be chock full of important macro data.

Monday is also the first in a week of National Day holidays in Mainland China.

National Day, officially the National Day of the People's Republic of China, is a public holiday in China.

This holiday commemorates Mao Zedong's formal proclamation of the establishment of the People's Republic of China on October 1st, 1949.

Presently, China's National Day is celebrated over a one-week period.

 

  • The 7-day holiday begins from Oct. 1st and runs until the 7th. It is called “Golden Week” in China. 
  • During this week, many Chinese people travel around the country, to enjoy the holiday.


On Monday, the NBS Mainland China manufacturing PMI for September comes out. The consensus is for 49.5, while the prior reading is 49.1.

The Mainland China Caixin Manufacturing PMI for September was 50.4. It too gets an update, along with the Caixin Services PMI, with its prior at 51.6.

The dissenting U.S. FOMC voter, Michelle Bowman, gives a speech.

Fed Chair Powell also gives a speech.

The Japanese household unemployment rate for August comes out. It was 2.7% in July. The consensus is for 2.6%.

On Tuesday, the Eurozone HCOB manufacturing PMI for September comes out. The prior reading was a low 44.8.

The core Eurozone HICP consumer price inflation measure for September comes out. It was +2.8% y/y in August.

The Canadian S&P global manufacturing PMI for September comes out. It was 49.5.

The U.S. S&P manufacturing PMI for September comes out. It was 47 in August.

The more important ISM manufacturing PMI for September also comes out. It was 47.2 in August.

U.S. JOLTS job openings come out for August. In July, these were at 7.67M.

On Wednesday, U.S. ADP private job adds for September come out. These were +99K in August.

On Thursday, U.S. initial jobless claims come out, for the week of Sept. 27th. The prior week was at a low 218K.

The U.S. services PMI comes out for September. It was 51.5 in the prior reading.

On Friday, U.S. nonfarm payrolls for September come out. These were +142K in August. The U.S. household unemployment rate was 4.2% in August.
 

Conclusion


I finish with Zacks Research Director Sheraz Mian’s key Q3 earnings points:

Zacks latest figures came out on Sept. 27th, 2024.

(1) Estimates for Q3-24 have come down since the start of the period.

The magnitude of estimate cuts significantly bigger than what we had seen in the comparable periods, of the year's first two quarters.

This negative shift in the revisions trend reverses the prior favorable development on this front in recent quarters.

(2) Zacks expects total Q3 S&P500 earnings to be up +3.2% from the same period last year, on +4.5% higher revenues.

Estimates have steadily come down since the start of the period. The current +3.2% growth pace is down from +6.9% at the start of July.

(3) Not only is the negative revisions trend more pronounced relative to other recent periods. But it is also more widespread.

Since the start of Q3, estimates have declined for 14 of the 16 Zacks sectors.

The biggest declines were seen for the Transportation, Aerospace, Energy, Basic Materials, Construction, Medical and Consumer Discretionary sectors
On the positive side, estimates have modestly increased for the Tech and Finance sectors over that period

(4) For the Zacks Tech sector, Q3-24 is expected to be the 5th consecutive quarter of double-digit earnings growth (up +11.5%).

Excluding the Tech sector’s contribution?

Q3-24 earnings for the rest of the S&P500 index would be flat.

In short, our moment for a ‘soft’ landing is in hand.

As we enter Q4-24 to start this week.

So, both covering analysts — and stock traders — can start to more cleanly see where S&P500 earnings and revenue growth go from here.

That’s it for me.

John Blank, PhD.
Zacks Chief Equity Strategist and Economist


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