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Week Ahead Preview: 26 July 2021

Fawad Razaqzada Fawad Razaqzada 26/07/2021
Week Ahead Preview: 26 July 2021 Week Ahead Preview: 26 July 2021
Week Ahead Preview: 26 July 2021 Fawad Razaqzada
  • Chinese shares extend drop on crackdown, US stocks near all-time highs
  • Tesla earnings after the closing bell
  • Apple, Amazon, Microsoft and Facebook among other earnings highlights this week
  • FOMC key macro event on Wednesday
  • Plenty of economic data including the Fed’s favourite inflation measure on Friday
Global equities have had quite a mixed ahead of what could be huge week given that we have plenty of (US technology) company earnings results and macro data to look forward to, as well as the FOMC meeting in mid-week. Overnight saw Chinese shares drop as the nation’s widening technology crackdown weighed on risk sentiment. This initially hurt sentiment when the European markets opened, but by the middle of Monday’s session (when this report was being written) the markets here had bounced nicely off their lows, along with Wall Street, copper and crude oil prices. In a further sign of rising risk appetite, Bitcoin was holding on to most of its sharp overnight gains. Investors were looking forward to the publication of Tesla’s quarterly results after the close of markets, plus the latest numbers from Apple, Amazon and Microsoft later on in the week. UK banks Barclays, NatWest and Lloyds were also due to publish their results, while on the macro front, we have the US Federal Reserve meeting in mid-week and the Fed’s favourite inflation gauge on Friday to look forward to.

Last week was a rollercoaster for the stock markets. After initially extending their declines from the week before, stock indices stormed back over the next few days, sending the Nasdaq to a new all-time high by Friday as technology shares surged. Investors were relieved to find out that the ECB was actively making it crystal clear that its emergency stimulus measures were not going to end any time soon, in part because of concern about the spread of coronavirus variants and supply bottlenecks. The German DAX and other European indices also rose sharply as yields dipped. Meanwhile, the start of the technology earnings season also boosted sentiment as companies such as Twitter and Snap beat, following decent numbers from the banking sector the week before.
 

Looking Ahead

 
As we start the new week, much of the focus will remain on the US technology sector as the big household names will all be releasing their results, starting with Tesla tonight, followed by Apple, Microsoft, Alphabet and Amazon in the subsequent days. In addition, we will have plenty of important macro events such as the Fed’s policy decision on Wednesday and their favourite measure of inflation on Friday, to look forward to.
 

FOMC policy meeting

 
The FOMC meetings are always important for the markets, especially when we are getting closer and closer to the time when there will be a shift in the central bank’s policy stance. On Wednesday, however, don’t expect to see any explicit changes in the Fed’s stimulus programmes. What is important to pay attention to is on the topic of tapering discussions that started in June. The Fed is likely to raise its voice regarding tapering at the August Jackson Hole conference. With inflation running hot and a few doves at the Fed such as James Bullard becoming a little bit more hawkish, the risks are skewed towards earlier policy normalisation than the Fed chair Jerome Powell has signalled to the markets. Powell thinks inflation pressures are largely transitory and with employment remaining lower than the pre-pandemic levels, he doesn’t believe it is the appropriate time to signal an imminent shift in policy. Still, if Powell reveals that tapering talks have become louder and starts laying the groundwork for policy normalization starting in Q3, then we may see the markets turn volatile with stocks likely to pull back and dollar to rise. Otherwise, sentiment towards risk assets could remain positive.
 

Technology earnings in focus

 
With the Nasdaq and S&P 500 hitting fresh record highs, expectations are running high as we look forward to a busy week for technology earnings. The tech giants will need to beat expectations and provide favourable forward guidance to keep indices at these levels. If they disappoint, we may very well see another sharp pullback.

 

Chart to Watch: Tesla

 
After its meteoric rise, Tesla will be in focus on Monday after its shares pulled back about 25% from record highs in recent months. Its shares have fallen in part due to valuation concerns with other carmakers such as GM, Ford and Daimler all ramping up their own electric vehicle offerings. Will the company surprise the markets with some forecast-beating figures?

tesla
Source: ThinkMarkets and TradingView
 
TSLA has managed to hold around its rising 200-day moving average ahead of its earnings results. Bullish investors and speculators will want to see a clean break above the triangle pattern, while a breakdown below would be deemed a bearish outcome.
 

Will there be any more variants of Covid?

 
Although risk sentiment was overall positive Monday for Western markets, it is work keeping a close eye on the Chinese equity market sell-off as that could trigger a bit of panic on this side of the world. There’s also the potential that the big tech companies may fail to live up to the high expectations.
Other catalysts that could potentially lead to renewed weakness in risk appetite and a pullback in stocks include the potential for new mutations of Covid to emerge while concerns over the delta variant hasn’t gone away even if UK numbers have been falling for the past few days.

If there’s a broader spread of the delta variant which leads to additional economic restrictions across important economic regions of the world, that could scare away the bulls as too will new mutations of the virus that potentially impact fully vaccinated people. Otherwise, investors remain convinced that with the ongoing vaccinations programme, the virus should remain under a bit of control and that central banks will be there to act as backstop for the markets in any event.
 

Robinhood IPO

 
Robinhood will be making its stock market debut on Wednesday. The company was set to raise $2 billion by selling up to 55 million shares, in the range between $38 and $42. If successful, it would give Robinhood a valuation of around $40 billion. Anything more would be a bonus. But as Coinbase found out previously, not all IPOs will live up to expectations despite a great deal of early interest.
 

Corporate results and macro data highlights

 
Monday
  • Earnings: Tesla
Tuesday
  • US Consumer Confidence (CB), Case-Shiller House Price Index and durable goods orders
  • Earnings: Apple, AMD, Microsoft, Alphabet, Visa and Starbucks         
Wednesday
  • CPI estimates from Australia and Canada
  • FOMC statement and press conference (no dot plots)
  • Earnings: Barclays, Facebook, PayPal, Qualcomm, Pfizer, Boeing, Ford, McDonalds
  • Robinhood IPO
Thursday
  • German CPI and unemployment; US Advance GDP (second estimate), Unemployment Claims and Pending Home Sales m/m
  • Earnings: Lloyds, Amazon, MasterCard
Friday
  • Japan industrial production and retail sales
  • Eurozone prelim GDP and flash CPI estimates (with French, German and Spanish data released earlier in the day)
  • German retail sales
  • Canadian GDP
  • US Core PCE Price Index among handful of other US macro pointers
  • Earnings: NatWest, Exxon and Chevron, Berkshire Hathaway, Caterpillar and P&G
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Meet our contributors
Fawad Razaqzada
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Fawad Razaqzada
Market Analyst, London

Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms. He leverages years of market knowledge to provide retail and professional traders worldwide with succinct fundamental & technical analysis. Fawad also offers trading education to help shorten the learning curves of developing traders.
 
His colleagues consider him an expert at reading price action on the charts. This together with his deep understanding of economics and fundamental analysis, and trading experience, puts him in a great position to forecast short term price movements. Fawad covers a wide range of markets, including FX, commodities, stock indices and cryptocurrencies and his comments are regularly quoted by the leading financial publications such as Reuters and Market Watch. In addition to ThinkMarkets, Fawad also provides analysis and premium trade signals on his own website at TradingCandles.com.
 
 

Carl Capolingua
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Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

Kearabilwe
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Kearabilwe Nonyana
Market Analyst, South Africa

Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives. His career in the financial markets has seen him hold various positions in global investment banks and global CFD and Spread betting firms. He has deep interest in using quantitative methods to help him understand and teach the fundamental drivers of asset prices.
 
 
 

Fawad Razaqzada
Fawad Razaqzada
Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms.
Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.
Kearabilwe
Kearabilwe Nonyana
Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives.

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Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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