Almost everything next week could play second fiddle to China’s Third Plenum. The world’s second-largest economy is expected to lay out its economic path for the next five to ten years. Markets will be looking at how it plans to tackle the property crisis (a disaster), the Sino-US trade tension (intractable), rising youth unemployment (an embarrassment), an ageing population (unavoidable), and slowing economic growth (self-inflicted). That’s a lot to get through.
Elsewhere, the European Central Bank will announce its latest interest-rate decision. In June, the central bank lowered the cost of money by 0.25%. But some members of the rate-setting committee have expressed concerns that inflation might not converge to the bank’s 2% target by 2025.
Indonesia will also announce its latest interest rate decision. In June it left interest rates unchanged at 6.25%, as it kept one eye on inflation and the other on the weakness of the rupiah. The situation could improve if the US Fed should ease up on monetary tightening. But that is a big “if”.
Corporate news
Johnson & Johnson (NYSE: JNJ) and Abbott Laboratories (NYSE: ABT) will be the standard bearers for the healthcare sector. J&J, today, is not nearly as diversified as it used to be. Shorn of its consumer business, it now has two divisions, namely, pharmaceuticals and medical devices. In April, it swung into a first-quarter profit on revenue that rose 2%. The dividend darling also increased its quarterly payout, marking the 62nd year of consecutive increases.
Abbott Laboratories is another consistent dividend payer. It has increased its quarterly payout 50 years in a row. In April, the company reported strong first-quarter numbers with medical devices providing the biggest source of growth. It has also raised its guidance for sales and profit for the full year.
Domino’s Pizza (Nasdaq: DPZ) is expected to post another set of strong results. In April, the flatbread specialist reported a 22% jump in earnings on revenue that rose 5.9%. It said same-store sales increased 5.6%. The company said that growth had been driven by its loyalty programme and the launch of marketing on Uber Eats.
Another bunch of U.S. banks will announce quarterly results next week. They include Goldman Sachs (NYSE: GS), Bank of America (NYSE: BAC) and Morgan Stanley (NYSE: MS). Three of America’s biggest banks that have already announced results have been able to report higher profits. But all three, namely, JPMorgan Chase (NYSE: JPM), Citigroup (NYSE: C) and Wells Fargo (NYSE: WFC) have increased their provisions for bad debts.
Nokia (NYSE: NOK) could be a timely reminder of how once high-flying stocks can come down to Earth with a bump. There was a time when Nokia could do nothing wrong. Its share rose from around 2 euros a pop before the Millennium to an all-time high of 63 euros in May 2000 – an increase of 3,050%. (Does that ring any bells?). The shares are now worth 3.7 euros apiece.
In April, Nokia had to rely on cost-cutting to boost first-quarter net profit, as revenue plunged 20% in a challenging environment. It has fired one sixth of its workforce due to weakening demand for 5G equipment in two key markets. However, it said that it is confident of a stronger second half thanks to continued improvement in order intake.
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Disclosure: Abbott Laboratories is a constituent of the DKIP Asian Consumer Portfolio.
