We have a big week on the central bank front with statements from Bank of Japan and the European Central Bank. Earnings season also will keep traders busy this week. On the economic front, we have US GDP and Durable Orders.
Earnings: Earnings kicks into high gear with 181 S&P 500 companies and 12 Dow components scheduled to announce earnings this week. So far, 87 S&P 500 companies have announced earnings. Traders will continue to see individual stocks have huge price swings if a company’s earnings outpaces or fall short of what the street expected. According to Thomson Reuters I/B/E/S, we have now seen 17% of S&P 500 companies report 1st quarter earnings so far. Of them, 71% reported revenue above expectations while 79% have reported earnings above expectations. This week has some heavy hitters including Coca Cola, Verizon and Microsoft.
Bank of Japan: On Thursday (4/26), the Bank of Japan will release a policy statement followed by a press conference. As the bank keeps falling short of its inflation target of 2%, we are likely to hear a continuation of an easy monetary policy (ahem free money) where we will likely see markets in Japan and around the world increase. Any pull back in stimulus would likely see a jump in bond yields and a strengthening of the Japanese Yen.
GDP First Release: On Friday (4/27), we get our first release of US GDP for the 1st quarter. We get 3 releases per quarter, Advance, Preliminary and Final. The first release is the most impactful. If the reading comes in above 3%, which is Trump’s target to get the economy moving, expect to see markets increase. There is always the wildcard of a lackluster reading from the extremely cold winter (which will also be used an excuse) which could disappoint the street, sending markets lower.
ECB Interest Rate Statement: On Thursday (4/26), Super Mario Draghi will be speaking at the ECB’s press conference to announce their interest rate statement. Last week, Super Mario admitted that Euro area growth cycle may have peaked which sent the markets lower. As the ECB was supposed to announce the end of their bond buying program in the next few months, a reversal of tightening could potentially see markets rise globally. However, the near term knee jerk reaction has been markets falling and the Euro weakening.
Oil: Last week, oil hit a 4 year high as we saw Brent touch $74 per barrel after larger than expected draw downs in global supply. Saudi Arabia also mentioned that they would be happy if crude were to reach $80 or $100 per barrel. Should we see oil continue to increase, expect energy companies to rise and transportation companies will fall as oil is a big part of their expenses. A significant increase in oil could also slow economic growth and act as a tax (So much for that tax savings).
Manufacturing PMI: PMI readings from across the globe are also due out this week. Traders will watch these readings as potential weak readings could cause central banks to take further steps to stimulate their respective nation’s economies. Lately these readings have been slumping so the latest readings could be the result of central banks tightening monetary policy.
WildCard: Geo politics can always rear its ugly head in at any time on the latest headlines to come out of the Trump administration. Any headline on Michael Cohen, the Mueller investigation or changes to President Trumps cabinet can roil markets and cause volatility on the headline.