Will they or won’t they? The Fed’s rate-setting committee will be sitting down to pore over this month’s economic data to decide if they should cut interest rates. The general consensus is that they will most likely keep the Fed fund rate at 5.5% and wait for more data in August and September before deciding.
The US will also announce July non-farm payroll numbers that is expected to show another good month of job creation. Meanwhile, the unemployment rate could be unchanged at 4.1% in July.
China is expected to show that its economy is still struggling as foreign direct investments continue to drop and manufacturing continuing to contract. One bright spot could be the services sector that might have expanded.
The Bank of Japan will decide whether to raise interest rates in July. The rate-setting committee generally agrees that rates need to rise. But they can’t agree on when. They will probably sit on their hands for now and wait for the US Fed to move first.
On the results front
The US earnings season moves up a gear with three more of the Magnificent 7 stocks set to report. When Microsoft (Nasdaq: MSFT) publishes full-year figures, its cloud business, Azure, is unlikely to disappoint. But the market may want to know how much money is being spent on A.I., and when does it expect to generate a return on the investment.
Apple (Nasdaq: AAPL) should stop chasing cash-strapped Chinese consumers. Chinese households can no longer afford the better things in life, as the economy goes embarrassingly into reverse. Away from China, Apple could delight with growth in services, improvement in margins, developments in Apple Intelligence, and updates on India.
The parent of Facebook, Meta (Nasdaq: META) has been a Johnny-come-lately to the A.I. space. Investors will be keen to hear whether its Llama 3.1 open A.I. platform will be able to compete with the likes of ChatGPT. The other parts of Meta’s business are likely to demonstrate reasonable growth thanks to continued advertising spend.
Investors will be able to compare two coffee chains simultaneously. China’s Luckin Coffee (Nasdaq: LKNCY) and America’s Starbucks (Nasdaq: SBUX) will report on the same day. In May, Luckin posted a 41.5% rise in first-quarter revenue, as it added more stores to its portfolio. But it made an operating loss.
Unlike Luckin, Starbucks is profitable – to the tune of around US$1 billion a quarter. It is unlikely that Starbucks will draw attention to a stake in the business by activist shareholder, Elliott Investment Management. But the market might be encouraged if it should signal a change in the strategic direction of the business.
A trio of high-profile pharmaceutical companies are pencilled in for results. They are Pfizer (NYSE: PFE), Merck (NYSE: MRK) and GlaxoSmithKline (LSE: GSK). For Pfizer, it is very much a case of life after COVID. So, no great surprises if earnings should decline. Unfortunately for employees of the company, Pfizer could embrace the tried-and-tested formula of cutting costs to boost profit.
In April, Merck said it expects worldwide sales to be between US$63.1 billion and US$64.3 billion. This is likely to be driven by its immunotherapy treatment Keytruda and its HPV vaccine Gardasil. Meanwhile, the market will be hoping that GSK can reprise its first-quarter performance in the second quarter. In May, GSK posted a 6% rise in sales, a 17% improvement in core operating profit, and an improvement in core operating margin.
Oversea-Chinese Banking Corporation (SGX: O39), HSBC (LSE: HSBA) and Standard Chartered(LSE: STAN) are set to report. Since 2022, bank profits have been boosted by rising net interest margins. But this could soon come to an end when the Fed starts to cut interest rates. In the absence of the low-hanging fruit, investors will be looking to loan growth and whether the banks will be able to attract enough high net worth customers to make up for the shortfall.
Other companies that are expected to report include DFI Retail Group (SGX: D01), Hongkong Land(SGX: H07), Smith & Nephew (NYSE: SNN), and L’Oréal (NYSE: LRLCF).
If you’d like to learn more investing concepts, and how to apply them to your investing needs, sign up for our free investing education newsletter, Get Smart! Click HERE to sign up now.
Get more stock updates on our Facebook page. Click here to like and follow us on Facebook.
Disclosure: Microsoft, Apple, DFI Retail, Hongkong Land, Smith & Nephew are constituents of the DKIP Portfolios. David owns shares in GSK, OCBC, HSBC and Standard Chartered.
