For Immediate Release
Chicago, IL – June 12, 2018 – 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 Oshkosh Corp. OSK, Chemed Corp. CHE and Urban Outfitters URBN.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Monday’s Analyst Blog:
The World Cup Begins: Global Week Ahead
We have lots of global events this week, counted in terms of soccer games, a historic diplomatic summit, and three major monetary policy meetings.
Coming hot out of the trading gates on Monday, global stock markets will already be digesting the chaotic meetings over trade and security between Trump and leaders of the other G7 nations at a weekend summit in Canada.
Below are five big Reuter’s in London world market themes. These are likely to dominate the thinking of investors and traders alike, in the coming Global Week Ahead.
I put Thursday’s World Cup opener at number 4 out of 5, with Brexit the caboose.
(1) The U.S. and North Korea Summit Happens on Tuesday
On Tuesday, U.S. President Donald Trump and North Korea’s Kim Jong Un are due to meet for a historic summit in Singapore. In an ideal scenario, Kim would agree to abandon all of the North’s nuclear capabilities in return for Trump easing sanctions on his economy.
But things are rarely ideal, and they are unlikely to be simple, either. Complete, verifiable and irreversible dismantlement — or CVID as it is known in nuclear circles — almost certainly isn’t what Kim has in mind, so whether Trump shows any flexibility will be crucial.
Financial markets barely reacted when the two were trading bombastic barbs last year but investors still aren’t sure how to trade Trump’s new softer side or Kim’s readiness to trade his nuclear arsenal for recognition and aid.
There is a whole multitude of options, and assigning probabilities to scenarios as extreme as nuclear Armageddon or lasting peace on the Korean peninsula is no easy task.
(2) The FOMC Meets and Hikes Rates 25 bps on Wednesday
On Wednesday, the world’s most influential central bank, the Federal Reserve, looks all set to raise U.S. interest rates for a second time this year and the seventh since December 2015.
Strong jobs data last week and signs that inflation is nearing the 2 percent sweet spot mean Fed chairman Jerome Powell and his Open Market Committee are in a good position to lift rates again despite the angst over Trump’s global trade tariffs.
Markets are fully priced for the move so what could the effects be? According to a recent poll by Reuters, the average 30-year mortgage rate will rise to 4.60 percent by year-end and then touch 5.0 percent by end-2019. That will mean loan affordability is getting steadily worse.
Emerging markets who borrow heavily in dollars won’t enjoy it much either if it pushes up the greenback again. A number of key countries in the EM complex are already under intense pressure and higher U.S. rates won’t help at all.
(3) The European Central Bank (the ECB) Discusses Exiting “QE”
European Central Bank rate-setters have put the cat among the pigeons by suggesting they will look past Italy’s political problems when they meet on Thursday and push on with discussions to close their 2.55 trillion euro bond-buying scheme.
It has made it one of the most keenly anticipated meetings for a long time. If the bond buying ends, rate hikes can’t be far behind. Investors are starting to price in the summer of 2019 for a possible first move, with some even suggesting the bank’s -0.4 percent deposit rate could be back up to zero by the end of next year.
Italian politicians have also ramped up their war of words, accusing the ECB of showing “bias” against Italy by favoring Germany in its bond-buying program.
While Mario Draghi & Co. are unlikely to take the bait, investors are speculating that they may decide it is not worth the hassle to continue with the program and get embroiled in further political squabbles.
(4) The World Cup Begins on Thursday
The biggest sporting event on the planet — the FIFA World Cup — starts in Russia on June 14th. And as much as bookmakers agree either Germany or Brazil will lift the famous trophy, financial analysts are equally unified on another matter: large amounts of beer will be consumed.
Morgan Stanley found that 2-3 percent more beer gets drunk in a host country during a World Cup year when they looked at the four previous hosts — France, Germany, South Africa and Brazil.
Carlsberg, the market leader in Russia, and Budweiser maker ABInBev, an official sponsor, could therefore be the top scorers.
ABInBev has also estimated that its sales in soccer hotbeds Brazil and Argentina will go up by 0.5 to 1 percentage points and though it’s difficult to attribute it to football fever with certainty, both Heineken and ABInBev outperformed other brewers during the last World Cup in 2014.
(5) Brexit Gets Attention in Britain’s Parliament
After months of building up immunity to the slow-moving Brexit saga, investors may be hit by a dose of sterling volatility next week as the process enters a potentially critical phase. Britain’s parliament votes on June 12th on amendments to the government’s EU withdrawal bill, ahead of a critical summit of EU leaders later in the month.
Time is running out for Prime Minister Theresa May, and her cabinet appears more divided than ever. May’s future is again being called into question, and speculation is even growing again that there could be a general election later in the year.
While sterling and gilts look relatively calm on the surface, traders are beginning to take cover via the options market. 1-month sterling/dollar implied volatility this week rose nearly 1 per cent, a relatively small move in nominal terms, but the biggest weekly rise in four months.
Top Zacks #1 Rank (STRONG BUY) Stocks—
(1) Oshkosh Corp.: On top of a high #1 Rank, this $5.5B market cap stock holds a Zacks long-term VGM score of B, led by an A in Value. This is an equipment maker for autos and trucks.
(2) Chemed Corp.: This is a #1 ranked, $5.2B market cap, outpatient and home health care player, with a long-term Zacks VGM score of B. Help to the aging is very profitable right now in the USA.
(3) Urban Outfitters: Yes, a #1 ranked retail apparel and shoe seller is on the lists this week. Not all of retail is dead, but the USA is still grossly over-stored. The long-term Zacks VGM score is A.
Key Global Macro—
Tuesday’s U.S./North Korea summit will get lots of coverage.
The FOMC meeting wraps up on Wednesday. That is a high for the week. But don’t forget that the ECB meets and the BoJ meets too.
The 25 bps hike by the Fed is a done deal. The summary of economic projections should move little. The one trade-able issue is whether the FOMC heads for one more or two more rate hikes this year.
Late in the week, we get the U.S. Trade Representative release of its final list of targeted Chinese imports. That could be a stock market buzz killer.
On Tuesday, the U.K. ILO unemployment rate comes out. It has been at +4.2%.
The German ZEW indexes come out. The German current conditions are at 87.4 while the German economic sentiment is negative at -8.2. Is this pessimism at the highs?
On Wednesday, the U.K.’s CPI comes out. It could rise from +2.4% y/y to +2.6% y/y.
The FOMC meets and is likely to get the Fed Funds rate from 1.75% to 2.0%.
Argentina’s unemployment rate comes out. It could go from 7.2% to 8.2%. That pretty good, given the financial chaos.
On Thursday, Australia’s unemployment rate is out. It has been 5.6%. That’s modestly higher than the U.K.’s 4.2% and the U.S. 3.8%.
The HICP consumer inflation rate for Germany is out. It has been +2.2% y/y. Not as hot as the U.K.
The ECB meets. The main refi rate should stay at 0.0% and the deposit rate at -0.4%.
U.S. initial claims should stay super low at 222K.
The HICP for the Eurozone as a whole is out. It has been +1.1% y/y.
On Friday, Russia’s main monetary policy rate, the Key Rate should stay at 7.25%.
The U.S. University of Michigan sentiment index comes out. It was 98, which is high.
The BoJ overnight rate should stay at -0.10%.
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