Week Ahead: What Size Rate Cut Is The Fed Planning?

Week Ahead: What Size Rate Cut Is The Fed Planning?

Spreadex  | Jul 26, 2019 08:22

The last month or so of trading has been dominated by Fed speculation – well, on Wednesday the markets will finally find out what Jerome Powell and co. intend to do.

US

It is now pretty much locked on that the Fed will slash interest rates on Wednesday night. What is slightly less clear is how much they will cut them by. The most likely option appears to be a 25bps decrease, instead of a more drastic 50bps change, though that’s not guaranteed. What the central bank does, and how it frames its decision, could dictate trading at the start of August.

Also set to play a potentially important role this week is the resumption of trade talks between the US and China, with a contingent from the former travelling to Shanghai to continue negotiations on July 30th. Any titbits that leak out about which direction the talks are going may come to sway the markets.

On top of all that, there’s a busy ol’ economic calendar, with the core PCE price index on Tuesday and manufacturing PMIs on Thursday building to Friday’s non-farms jobs data, a report that may give investors a sense of whether or not the Fed was right to cut rates.

As for corporate updates, Apple on Tuesday, GE on Wednesday and General Motors (NYSE:GM) on Thursday are the highlights.

UK

Politically, the pound is going to be on high alert for any Brexit updates from new Prime Minister Boris Johnson. There’s also an appearance from the Bank of England on Thursday, one that will no doubt contain more warnings on the cost of leaving the EU without a deal in place.

Beyond that, the UK manufacturing and construction PMIs come out on Thursday and Friday, with the miner-concerning Chinese figures released mid-week.

The real meat of the UK’s week is going to come from its corporate calendar. Cranswick (LON:CWK) update on Monday, followed by Centrica (LON:CNA) and Greggs (LON:GRG) on Tuesday. Wednesday is then absurdly busy, featuring BAE Systems (LON:BAES), Direct Line (LON:DLGD), Intu Properties (LON:INTUP), Just Eat(LON:JE) (LON:JE), Lloyds (LON:LLOY), Rentokil Initial (LON:RTO), Smith & Nephew (LON:SN), Smurfit Kappa (LON:SKG) and Taylor Wimpey (LON:TW).

Thursday matches it with Barclays (LON:BARC), British American Tobacco (LON:BATS), Merlin Entertainments (LON:MERL) (LON:MERL), Mondi (LON:MNDI), Rio Tinto (LON:RIO), Shell (LON:RDSa), RSA Insurance (LON:RSA), Schroders (LON:SDR) and Standard Chartered (LON:STAN), while Friday wraps things up with RBS (LON:RBS), BT (LON:BT), Essentra (LON:ESNT), IAG (LON:ICAG) and Pets at Home (LON:PETSP).

Eurozone

The Eurozone has plenty of data to wade through this week. There’s Spanish inflation on Monday, French GDP and German inflation on Tuesday, the region-wide inflation and GDP readings on Wednesday, manufacturing PMIs on Thursday and retail sales on Friday.

Stock of the week: Apple Inc (NASDAQ:AAPL) – Q3 Results on Tuesday 30th July

Having recovered most of the ground lost across a very rough May, Apple will be hoping to strike a 2019 high following Tuesday’s Q3 results. Analysts are expecting a 10%-plus decline in earnings to $2.10 per share, off of $53.4 billion in revenue, a figure that’d be effectively flat year-on-year.

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