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This week’s focus: ECB, PMI, FAANG reports and new UK prime minister

The European Central Bank’s policy meeting will be front and center this week as investors wait to see what action central bank head Mario Draghi may take to support the euro area economy. The week will bring fresh insights into the global economic outlook, with manufacturing data for Japan, the euro zone and the U.S., due Wednesday. The calendar will also feature a first look at how the U.S. economy performed in the second quarter. Investors will also be getting the latest barrage of earnings reports, with tech companies in the spotlight after last week’s bank earnings and a new UK prime minister should be in place by the end of the week, as concerns over the prospect of a no-deal Brexit continue to build.

ECB policy meeting
The ECB is not widely expected to cut interest rates at its upcoming meeting on Thursday, but could signal that plans to loosen monetary policy are imminent amid heightened global uncertainty and ongoing trade tensions. Investors will also be listening out for any hint that the ECB is prepared to inject fresh stimulus into the euro area economy in the form of bond-buying and if so, when. Almost every major central bank, including the ECB and the Federal Reserve has adopted a dovish stance in response to the impact of trade tensions on the outlook for global growth.

Economic data
Purchasing Managers’ Indexes, generally reliable gauges of economic trends, have been painting a pretty gloomy picture in recent months. So advance manufacturing PMI data for Japan, the euro zone and the U.S. on Wednesday will be closely watched, given the bets on monetary easing in all three countries. The U.S. will report on both new and existing home sales, along with figures on durable goods orders ahead of Friday’s advance reading of second quarter growth. Economists are forecasting growth of 1.8%, slowing from 3.1% in the first three months of the year.

FAANGS earnings in focus
Netflix (NASDAQ:NFLX) kicked off earnings for FAANG stocks on a bleak note last week, with shares dropping 10.2 % after it reported its first U.S. subscriber drop in eight years. Facebook (NASDAQ:FB), which reports on Wednesday, has seen shares fall in recent days amid calls for greater regulation of the company’s handling of private information. It’s also under fire in Washington for its plan to launch a cryptocurrency, Libra. Alphabet (NASDAQ:GOOGL) releases results on Thursday, amid calls for it too to be more regulated. Amazon (NASDAQ:AMZN) reports the same day amid worries that rivals Walmart (NYSE:WMT) and Target (NYSE:TGT) are getting more competitive with online sales and deliveries. The fifth FAANG, Apple (NASDAQ:AAPL), opens its books on July 30. By then the effect on market sentiment should be clear.

New UK prime minister
The results in the race to succeed British Prime Minister Teresa May are due on Tuesday and she is expected to hand over power the next day. Boris Johnson, the face of the Leave campaign in the 2016 Brexit referendum, looks almost certain to become the new prime minister, beating foreign minister Jeremy Hunt into second place.

The transfer of power has major implications for Brexit with parliament having failed to approve May’s withdrawal deal.


 Trader Georgi Bozhidarov


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