For Immediate Release
Chicago, IL – August 13, 2019 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: KLA Tencor KLAC, Fortesque Metals FSUGY and Fortinet FTNT.
Here are highlights from Monday’s Analyst Blog:
Global Week Ahead: Summer Vacation on the Yellow Sea
The most relevant global news this week may be this. China’s leaders have been on a two-week annual retreat at a resort on the Yellow Sea.
This retreat runs over the first half of the month of August each year.
Yes. There are loads and loads of macro data prints, relevant monetary policy discussions, and political turmoil to discuss.
Here are Reuters in London’s five world market themes, re-listed in order of importance to equities.
(1) Are Government Safe Haven Bonds Overbought?
The markets rout after an escalation in the U.S.-China trade war marked new milestones for many assets, and government bonds were no exception.
As investors piled into safe-haven assets, Germany’s 30-year bond yield hit a record low, Ireland’s 10-year bond yield turned negative, and the Netherlands became the latest to join that growing club of countries with entire yield curves drowning in sub-zero territory.
The evaporation of global yield is pushing investors further out the maturity spectrum. Austria’s 100-year bond is up some 63% year-to-date, with a vertical price chart harking back to similar surges in cryptocurrencies and tech stocks.
Time for a bubble to pop?
(2) On Wednesday, Traders Get ‘Scary’ Flash GDP Data on Germany and the Eurozone.
Fears of a major downturn in euro zone powerhouse Germany grew this week following “scary” industrial output figures for June and reports due over the coming week that will hold those concerns up to the light.
On Wednesday, quarterly flash gross domestic product data for both Germany and the wider euro zone is released. The consensus forecast from Reuters’ poll is the euro zone GDP grew 0.2% in the second quarter but in Germany - the bloc’s largest economy - it’s expected to have shrunk 0.1%.
Markets are on high alert for signs Germany and other governments will use such cheap borrowing rates to support the reflation policies of their central banks. A report this week that Germany might issue new debt to finance climate protection caused a brief spike higher in bund yields and the euro.
(3) On Thursday, There is a Deluge of U.S. Macro Data.
After an escalation of the U.S.-China trade row sparked one of the most volatile weeks of the year for U.S. stock and bond markets, investors are focusing on the U.S. economy’s ability to absorb a tariff war with some critical health checks on Thursday.
But market watchers are in for deluge of data on Thursday: July retail sales, industrial production, the August Philadelphia Fed index and NAHB housing market indicator are coming. So are weekly jobless numbers and the June TIC data update on the breakdown of Treasury holdings
A quarter-point cut at the Fed’s next meeting on Sept. 18th is now almost fully priced.
Markets see one chance in four of a larger 50-basis-point rate cut next month.
(4) Keep An Eye On the Chinese Currency.
What seemed like a minor lurch in China’s currency has become a big deal for financial markets. Many fear it may be the beginning of a Chinese competitive devaluation in response to U.S. tariff threats, which in turn could trigger a currency war that may force other regional central banks to slash interest rates. The move also sparked fresh doubts a deal in the U.S.-Sino trade war will ever get done.
That 2-plus-something percent slide in the heavily managed yuan has pushed it to 2008 lows and to the weaker side of 7 per dollar. Beijing is saying it’s merely letting market forces drive the yuan, not weaponizing the currency, and has done its best through open market operations to contain the move. Chinese trade data showed that, with falling imports and exports, Beijing needs a weaker currency to support its economy.
Markets are watching the back and forth between Washington and Beijing, accusations of currency manipulation, plus the mounting pressure on the Fed to cut rates again.
In addition, there is the question of how Beijing will manage expectations around its currency so it doesn’t spark a flight of domestic and foreign capital.
(5) On Sunday, Argentina Goes to the Polls.
Argentina goes to the polls for primary elections on Sunday in what is seen as a dress rehearsal for October’s national ballot and a giant referendum on the austerity politics of center-right incumbent President Mauricio Macri.
Voters will choose among 10 presidential candidates, but the main political parties have already established theirs, so the primaries, known as the PASO, should reveal whether the strait-laced Macri has any serious hope of catching his main rival, the moderate Peronist Alberto Fernandez.
Zacks #1 Rank (STRONG BUY) Stocks—
(A) KLA Tencor: This is a $136 chip stock with a $22B market cap. The Zacks Value score is C and the Growth score is D. The PEG ratio is 1.1. Is it time to buy the chip stocks, or sell them? In the price chart, the last few weeks, I see a bona fide bull/bear trading debate going on.
(B) Fortesque Metals: This is a $9.75 iron ore mining stock with a market cap of $15B. Iron ore prices got blasted by the news of a new set of U.S. tariffs. Will this market price and this stock keep on its upward trending path. Let’s see what happens here. This is a Zacks #1 Rank stock, so the analysts are bullish on the earnings fundamentals underpinning a share price recovery.
(C) Fortinet: This is an $84 a share cloud security stock, with a market cap of $14.2B. Great business these days, and a great market share in that business. Just a few weeks ago, the stock posted a nice quarterly EPS report, beating earnings by +16%. I would be a buyer here. The bulls would point to the Zacks Growth score of B. The bears would point out the Zacks Value score of F.
Key Global Macro—
Banxico will deliver a rate decision on Thursday August 15th. Consensus is divided toward the potential outcome. A slim majority expect a hold.
Mexican Consumer Inflation at +3.8% y/y. This is running inside of the central bank’s 2 to 4% inflation target range along with core CPI at the same +3.8%. That kind of inflation performance alongside a fairly stable peso that has run between about 19.0 and 19.5 to the USD over the past couple of months does not lend a sense of urgency to easing.
A power struggle is occurring in Italy’s government that should shame both parties against the backdrop of decades of political instability. PM Conte and his Deputy Salvini are locked in a contest for power. Salvini demands elections and threatens to bring down the government. Salvini heads the xenophobic League party. An interim guarantee government is being explored before possible elections in October or November.
The United States
In terms of U.S. macro data, this is a jam-packed pair of weeks.
• The week of August 12th to the 16th will focus upon top-shelf macro data.
• The following week will be about a heavy line-up of Fed communications including meeting minutes and the Jackson Hole symposium.
China reports key macro data on Tuesday, August 15th (aka fixed asset investment, industrial production, and retail sales.)
China’s leaders have been on a two-week annual retreat at a resort on the Yellow Sea over the first half of the month.
On Monday, it is the calm before the global macro data storm.
On Tuesday, the latest U.S. CPI reading hits the tape.
The July U.S. CPI print is expected to reveal stable headline CPI at +1.7% y/y and unchanged core at +2.1% y/y.
The N.Y. Fed’s household and credit report arrives on August 13th.
German and EU harmonized CPI data come out. Ditto closely watched German ZEW indices. The German ZEW current situation should be poor at -6.5. German ZEW Economic sentiment is equally poor at -28.0.
The U.K.’s ILO unemployment rate is at 3.8%. We get an update. It must be said. The Brexit drama is playing out at full U.K. employment.
Mainland China reports fixed asset investment (consensus +5.9% y/y), industrial production (consensus +6.0% y/y) and retail sales (consensus +8.6% y/y, down from a prior +9.8% y/y print).
On Wednesday, the latest Euro area GDP growth (+0.2% for the quarter) and industrial production figures come out.
On Thursday, the N.Y. Fed’s Empire manufacturing gauge and the Philly Fed’s metric will be released. These inform expectations ahead of the next ISM-manufacturing print.
The readings could provide the first glimpse at damage done by Trump’s tariff threat on August 1st. It’s plausible that a pick-up in new orders to front-run tariffs could occur -- before subsequent weakness.
U.S. industrial output in July will be updated.
Weekly U.S. jobless claims come out.
U.S. retail sales come out. July’s print might get a mild price lift from higher gasoline prices but reflect weakness in auto sales. The focus will be upon whether the retail control group remains strong, as it removes auto dealers, building materials, food services and gas stations and serves as more direct input to expectations for how consumption gets captured in GDP.
Also of relevance to bond markets may be second quarter productivity and unit labor costs on August 15th. A material slowing of productivity growth is likely alongside an acceleration of productivity-adjusted wage growth following the drop in Q1. At the margin, this could be taken as a mildly inflationary signal but the noise in the data trends has been high.
Mexican monetary policy gets made.
On Friday, look out for the updated University of Michigan consumer sentiment data, and U.S. housing starts and permits data.
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