Fundamental Analysis

Equities Climb as Traders’ Attention Turns to Corporate Earnings and Employment Data

  • Apple Inc and will report on Thursday.
  • European shares experienced modest gains after Eurozone inflation declined further in July.
  • The Eurozone returned to growth in the second quarter.

Equities rose slightly on Monday as traders focused on upcoming corporate earnings and a crucial employment report this week. Notably, Apple Inc and will report on Thursday, along with other well-known companies like Caterpillar Inc, Starbucks Corp, and Advanced Micro Devices.

Florian Ielpo from Lombard Odier Investment Managers remarked, “Markets are becoming more sensitive to information, and people are scrutinizing new data closely.” Key economic indicators to watch this week include the US ISM surveys on manufacturing and services and the July payrolls report. 

Citi market strategists believe this week’s data will likely align with the ‘soft landing’ narrative. Still, any unexpected positive job growth could raise questions about the coexistence of slowing inflation with tight labor markets.

In recent times, all three main US indexes have posted gains. Evidence of cooling inflation and a resilient economy has bolstered investor confidence in the economy’s ability to withstand higher rates for a longer period. Additionally, positive quarterly earnings from large-cap growth companies such as Alphabet and Meta Platforms and chipmakers Intel and Lam Research have boosted investor sentiment.

Chicago Federal Reserve Bank President Austan Goolsbee stated that the Fed is already bringing down inflation without causing a recession. Moreover, it will continue monitoring the data as September approaches to determine if further monetary tightening is necessary.

Meanwhile, European equities experienced modest gains after Eurozone inflation declined further in July, indicating a slowdown in underlying price growth. This reassures the European Central Bank (ECB) as it contemplates ending a series of interest rate hikes.

Eurozone inflation (Source: Eurostat)

Eurozone inflation (Source: Eurostat)

Eurozone consumer prices grew by 5.3% this month, dropping from 5.5% in June, continuing a downward trend that began in the autumn. Prices, excluding energy and unprocessed food, rose 6.6%, compared to a 6.8% increase the previous month. 

Additionally, the bloc returned to growth in the second quarter, but Germany, the largest country in the Eurozone, experienced no growth, while Italy suffered a contraction.

Andrea Cicione, head of research at TS Lombard, remarked, “The news in Europe is somewhat mixed, with preliminary data in Italy showing much weaker results than expected. However, the Eurozone as a whole is still performing relatively well.”