Week Ahead starting 21/08/23: Jackson Hole, flash PMI data, NVIDIA, Zoom earnings
All eyes will be on Jackson Hole next week in Wyoming at a gathering of central bankers. Tastylive’s Tom Sosnoff shares his thoughts with IGTV’s Angela Barnes on the event, as well as his favoured corporate earnings.
NVIDIA price through the roof
Welcome to the Week Ahead with me, Angela Barnes. You're watching IGTV. Let's look ahead then and start in China on Monday, 21 August 2023, because we're going to get the loan prime rate setting from the People's Bank of China.
China is expected to cut lending benchmarks with many analysts predicting a big reduction to the mortgage reference rate to revise credit demand and shore up the country's ailing property sector. That's in response to a deepening property market crisis. The central bank has pledged it would adjust and optimise property policies according to its second-quarter monetary policy implementation report that was published this week.
German pricing data expected
Moving on to Germany, we will have the latest producer price index data measuring the average change in the price of goods sold by manufacturers; prices fell in June from the previous month.
And then on Tuesday, 22 August, let's go to the UK where we will see the latest figures on public sector net borrowing. In May, the government's total debt power reached more than 100% of annual national income for the first time since 1961.
US home sales, crude oil data due
Moving on to the US, and we're going to have existing home sales as well as API crude oil inventories in the US. We'll have existing home sales and the latest American Petroleum Institute (API) crude oil inventories data that day.
On Wednesday, we'll have Eurozone UK, US manufacturing and services Purchasing Managers Index( PMI) flash data as well.
And then we will also have EIA crude oil inventories on Wednesday. Oil prices have been interesting recently. Oil prices gained this morning, but that's after falling for three straight sessions with both Brent and WTI crude up this morning.
There are those demand concerns in China weighing against supply concerns in Saudi Arabia and other Organisation of the Petroleum Exporting Countries (OPEC) members potentially extending those cuts beyond September, as has been suggested. So that will be something to look out for; oil prices as well.
US banking symposium at Jackson Hole
Thursday, 24 August is a busy day in the US with durable goods orders, initial jobless claims. So we'll get a good gauge of how the US jobs market is doing. And also, the Jackson Hole Symposium starts, a key event in the diary with the Federal Reserve Chair, Jerome Powell, giving a speech centrepiece that week that investors will of course be paying close attention to, critical for the broader market sentiment.
And then on Friday, we get an insight on consumer confidence in the UK. And also Germany will share its final second-quarter gross domestic product (GDP) growth rate. The first advanced estimate was released at the end of July in Germany, and they showed that real GDP grew at an annual rate of 2.4% in the second-quarter of this year. But that missed forecasts for modest grosses, weak purchasing power, higher interest rates and low factory orders weighed on the Eurozone's largest economy.
And then on Friday, we will also get the latest Baker Hughes oil recount in the US.
Plenty of food for thought with US data
Well, let's go now to Tasty's Tom Sosnoff, who's in Chicago in the US for us.
AB: Tom, it's good to see you there. I'm very interested - there's a lot to digest there - but I'm very interested to hear how you think investors should be positioning themselves ahead of all of that economic data that's due out next week.
TS: Sure. Well, first of all, we have a big day today because in the US, this is option expiration for August. So there's usually a ton of activity on today. And we're opening pretty significantly lower, at least a half a percent down this morning, free market and the NASDAQ down almost a full percent.
So it's going to be kind of an ugly opening here. I think that the economic data is going to have a little less to do with things as when you compare it to market momentum right now, which as clearly turns out, this week has been very bearish across the board.
'Is good news, bad news?'
And so the question becomes, when the markets turn south like this: is good news, bad news, and is bad news, bad news?
And I think that's the biggest market has to watch out for. And that's also the biggest risk. Because, you know, when markets kind of sell off, it doesn't really matter so much what the news is, because they turn good news into bad news, and bad news, obviously, you know, makes things worse.
So I think it's really a question of when we get down to that 5% correction area, is that enough and how will the market hold up through all the news next week?
AB: Including as well, Tom, of course, that speech from Jerome Powell next week as well. Is there anything that the markets are anticipating him to say about the Federal Reserve's monitoring that may impact the monetary policy path?
Can Powell stabilise freefalling bonds?
TS: Well, for us, it's all about what is actionable from it. Nobody really cares what he has to say if it's not actionable. So from an actionable side, you know, the bonds have been incredibly weak in over the last, let's say, two weeks. They have been essentially in freefall. In the US, the 30-year bond has traded down yesterday to about 118.5, which is the lowest it's been to in multiple years, essentially, except for a touch a couple years ago.
So we're at a point right now where long-term rates and short-term rates are at multi-year highs. And I think that whatever Powell says at this point, it's really just a question of whether it stabilises the bond market here, and is there an opportunity to the upside, because I think bonds are, at this point, grossly oversold?
So the question is, can Powell stabilise long-term and short-term rates here? And will we get a bounce in the bond market? I don't think it matters necessarily what he says. I think it matters how the market perceives his comments as a stabilising motion, and to see if we can get some kind of a flattening right here, a bottom in rates.
And many of us would like to see the yield curve start to widen a little bit because we'd like to see long-term rates go up and short-term rates come down. So I think that we're looking for a little bit of a yield curve move here, and we'd like to see it widen a little bit. And it's been flattening all year, so we'd like to see it kind of go the other way.
And I think that's going to be the real takeaway from Powell's talk. Can he push short-term rates a little bit lower? Can he push long-term rates a little bit higher? Can he get the yield curve back to where it steepens a little bit? And can bonds stabilise over whatever is said next week? And I think that's what we're all looking for.
AB: That's great, Tom. Thank you very much. And do stay with us. We'd like to come back to you in a moment with another question when we go through corporate highlights next. Thank you very much, Tom. So the Week Ahead, let's have a look.
We've got Zoom reporting its second-quarter earnings on Monday.
On Tuesday, John Wood Group is another one to look out for, releasing its first-half earnings. We will also have figures from Tall Brothers next week, too.
NVIDIA: mega-tech worth watching
Then a big one to watch on Wednesday, with tech giant NVIDIA reporting its second-quarter results. The US software company had its stock boosted again this week after Morgan Stanley analyst said that its stock is the firm's top pick following its most recent earnings report.
NVIDIA, which makes graphics processing units, is now valued at over $1 trillion. Its shares are up nearly 200% so far this year. And of course, it's a key player in the artificial intelligence AI market, which has certainly helped boost its stock.
However, strategists at Morgan Stanley have also recently highlighted how the AI bubble could be nearing a peak. So on 23 August, the company will offer investors more insight into its financial health with its second-quarter results. That's certainly one we'll be watching.
Snowflake, Hayes, Dollar Tree and Gap figures
Elsewhere, next week on the corporate calendar, we'll also have second quarter earnings from Snowflake on Wednesday. And then on Thursday, we'll be turning to Hayes with its full year results. And then as well, Dollar Tree on Thursday will also have results from Gap, the retail giant as well. They'll be releasing their second-quarter earnings.
And then no updates on Friday. So quite a few things to look out for on the corporate front next week as well.
So I'd like to go back to Tom at Tasty for his thoughts on this and which ones you're going to be watching, Tom. Of course, NVIDIA, is a big one.
TS: Yeah, well, I mean, start off the week with Zoom. And Zoom is interesting because Zoom is tradable, but it's kind of on its butt, as we would say, because Zoom is kind of near the low end of its range.
So it's an interesting place for people to like to trade earnings because it's a $65 stock or whatever it is right now, close to $65. And it's also a stock that has high implied volatility. So it's a very attractive stock to trade. It's just not as liquid as we would like it to be.
But as far as the big players next week, it's really all about NVIDIA. Last earnings cycle, NVIDIA blew the doors off to the upside. NVIDIA was the expected move was about $30 and it moved almost $90. So it moved three times the expected move last time and it caught everybody on earnings.
If I remember correctly, it was trading just around $300 or maybe a little bit under and it traded all the way up to almost $400. So it was a crazy move last time. And I don't think you're going to see that kind of earnings insanity this time around.
And I think NVIDIA, which is now trading, let's call it $430 and it has been strong all week. There's a lot of longs in NVIDIA right now, the whole street. I mean, nobody has a portfolio that's not long NVIDIA here.
So I kind of feel like that Morgan Stanley comment is maybe the upside capitulation, but we'll see. But there's no question that NVIDIA will set the tone for the market this week. I don't think you're going to see the kind of earnings results you saw last time when it just blew the doors off. But I do think that most of the week, the volatility and the market will take its cue from NVIDIA.
We are going to be playing it to stay inside the range this time. But again, it's just a crapshoot. Who knows?
AB: Well, Tom, I'm looking forward to seeing those results as well. And thank you ever so much, as always, for your insight. It was great to speak to you. Thanks so much.
That's it from us at IGTV with your look ahead to next week. So thank you for watching and do tune in for more charting and Trading the Trend. I'm Angela Barnes and this is IGTV. Thank you.
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