American markets today, Monday July 19, viewed several hours before the 9:30 a.m. EST opening appear poised to start very negative with major indicators in the red at time of writing, apparently spooked by the rise in Delta variant cases. The S&P 500 is struggling to climb.
Canadian markets also look poised to start lower.
European markets are open at time of writing and all major indicators there are in the red. In the United Kingdom, the increased numbers of COVID cases in today’s news overhangs the markets but will not lead to renewed lockdowns unless there is a commensurate surge in hospitalizations, explains James Athey, Investment Director at Aberdeen Standard Investments in London. “Renewed lockdowns (if they are ordered) would be bad for cyclicality in general,” he says, explaining that the makeup of the FTSE 100 is heavily skewed towards commodities and financials (generally considered to be value stocks). ‘The index would likely take this poorly.”
Amongst precious metals the safe havens of gold and silver are down.
Amongst currencies the British pound sterling, Euro and Canadian dollar are all down against the American greenback which is gathering strength, according to Jeremy Thomson-Cook, Chief Economist at London-based business payments specialist Equals Money. “The dollar is a little stronger this morning against G10 currencies as investors continue to dance around the prospect of a Fed that wants to taper stimulus or one that feasibly cannot still given the US jobs market’s performance in recent months,” he explains.
“Over the coming weeks the market’s attention will be now heightened for clues as to any deviation from the current Fed outlook leading to an earlier than forecast tightening of monetary policy.”
Amongst commodities, oil prices should stabilize or even drop following the announcement yesterday that members of the OPEC+ group agreed to increase oil supply from August by about two million barrels per day to stabilize prices. That agreement, if implemented, will mark a partial recovery from last year’s cut of 10 million barrels per day triggered by the slump in demand and collapse in prices triggered by the COVID 19 crisis. With other gradual increases, the net reduction stands at approximately 5.8 million barrels per day, according to Reuters.
The volume and impact of earnings releases this week will not match last week’s reports from the financial, travel, consumer and wealth management sectors but several are worth checking. Some of them will show where we have been and where we may be going.
In the latest chapter in the streaming wars saga, NetFlix Inc. reports second-quarter results on Tuesday. Slowed production of new shows during the pandemic may have hurt subscriber growth. Meanwhile, the company’s decision to get into video gaming amounts to a competitive salvo in its competition with the streaming arms of the Walt Disney Corp. and other Hollywood studios. Disney’s revenues are thoroughly diversified between streaming, theme parks, movies and toys amongst other sources, NetFlix needs to diversify and video games are a step in that direction. Not surprisingly, the move has attracted mixed reactions. At Wedbush Securities, analyst Michael Pachter and at IDC research director for gaming Lewis Ward have suggested the unlikelihood that the move will succeed. While the majority of analysts have a ‘Buy’ rating on NetFlix, Pachter at Wedbush. Christophe Cherblanc at Société Générale, Mathew Harrigan at Benchmark Co. and Laura Martin at Needham & Company have a Sell rating on it.
Also on Tuesday, wealth management titan UBS Group AG reports its second quarter results, widely expected to reflect solid revenues for the quarter.
For another clue about the recovery, Coca Cola Co. reports its second quarter results on Wednesday and which should include sales boosts triggered by the re-opening of restaurants, sporting facilities and theaters where it has strong penetration. Coca Cola can be seen as an indicator of the consumer sector although some of Coca-Cola’s markets are different from those of PepsiCola which last week reported a 5% increase over a year earlier.
Also, on Wednesday. Johnson & Johnson reports second quarter results on Wednesday and investors will be looking for an outlook on vaccine production, the need for booster doses and its medical devices operations.
And in the travel sector, United Airlines Holdings Inc. is expected to report second quarter results on Wednesday. As travel restrictions ease, investors will be looking for UAL’s stake in the recovery.
Each of these reports will have some clues about what can be expected in the coming months.
Al Emid is a financial journalist broadcaster and author. His next book. The 2022 Emid Report on Volatility is scheduled for a Winter release.