A volatile week ends on a positive note, big week for earnings

A roller coaster week for US stocks, and by the end, despite threats of cockroaches and trade wars undermining the upbeat mood, stocks finished the week in the US roughly where they started it. The Vix index, which spiked on Thursday, reversed most of that spike on Friday. This coming week, earnings season starts in earnest, with Tesla, Intel, Netflix, Coca-Cola, Lockheed Martin and HCA Healthcare to name but a very few. The list of major corporations from all sectors of industry is extensive. Overall, US corporates are expected to grow earnings by circa 8% from the same period last year. “The Mag 7” is once again expected to grow earnings ahead of that number at just under 15%, and the other 493 companies are expected to grow earnings by around 6.5%. So once again, big tech is a significant influence on the overall strength of corporate America. According to FactSet Insights, conceding its very early days, the third quarter earnings season for the S&P 500 is off to a mixed start relative to analyst expectations. While the percentage of S&P 500 companies reporting positive earnings surprises is above recent averages, the magnitude of earnings surprises is below recent averages. We shall have a much better idea at the end of this week as to the strength of corporate America.

Another month seems to be racing by, and on the macro front, this week it’s once again the turn of the Flash PMIs, providing the latest insights into developing economic trends in the world’s major economies. The ongoing Government shutdown could create a further vacuum in US economic data, as we were expected to receive the latest US inflation data in the form of the monthly CPI on Friday. This morning, we received the latest estimate of China’s GDP. Which declined to 4.8% in Q3 from 5.2% in Q2, but the decline was pretty much in line with expectations. Chinese authorities also reported weaker month-on-month retail sales.

The ongoing negotiations between Trump and Xi will most likely make headlines this week, but Irwin Stelzer in his Sunday Times Column summed it up pretty well, I thought. China and the US will dance to a deal, which seems to be the most likely outcome. This is probably why markets wobble on the news once again and quickly regain their composure. As for the UK this week, the key releases will be inflation and retail sales. The Bank of England expects inflation to rise to 4%, up from 3.8% in the previous month. We also receive the monthly CBI confidence index, which is expected to remain in negative territory, while retail sales are expected to soften month over month. Markets in Europe are expected to open this morning on the front foot