Central bank minutes and corporate results determine the compass of global markets

An economic analysis showed that the attention of global markets is turning this week to the minutes of Stocks, or redraw monetary policy expectations and market trends during the second half of the year.

According to the analysis, the markets ended the short trading week due to the official holiday with a strong cohesion of risk sentiment in general, but the general trend was formulated based on the emergence of signs of a slowdown in the American labor market and the decline in the severity of central banks’ tightening motives.

The American jobs report issued on Thursday revealed weakness in the labor market, which contributed to pushing the stock market shares. To the rise, and US bond yields to decline at the end of the week.

European stocks

In Europe, the STOXX 600 index recorded a new record high, achieving its strongest weekly gains since mid-May, supported by the general improvement in risk sentiment and the decline in pressures coming from the energy sector.

The conference remained "Sintra" Economic central banks under the microscope of attention; Meanwhile, Federal Reserve Chairman Warsh reaffirmed his commitment to the 2% inflation target, while European Central Bank officials discussed whether the decline in oil prices reduced the necessity of another hike in interest rates.

Asian Markets

In Asia, the Korean Kospi index witnessed sharp fluctuations due to concerns related to the artificial intelligence sector, before rebounding upward by 5.8% on Friday following an upward run in the shares of Samsung and SK. Hynix.

US Jobs Data

The US employment report released on Thursday provided a clear negative surprise; Nonfarm payrolls for June rose by only 57,000 jobs, compared to expectations of 110,000 jobs, while data for April and May were revised downward by a combined 74,000 jobs.

Although the unemployment rate fell to 4.2%, this positive headline figure masked an exorbitant picture of employment stagnation; The labor force participation rate fell to 61.5% from 61.8%.

These data came to reinforce the signals issued by the ADP private sector employment report earlier in the week, which showed the addition of 98,000 jobs in June, with annual wage growth stable at 4.4%.

Interest rates

The reaction of markets across various asset classes was consistent with this shift in vision towards a more flexible and easy path from Reserve side Federalin the future; A weak labor market may prompt voting members to avoid raising interest rates in the near term.

According to the analysis, this sentiment has caused stocks to rise, US bond yields to decline, and the dollar to weaken as traders reduce their bets on the risks of an imminent rate hike. Looking to the future, any step to raise in September has become difficult for the Fed to justify, even if stubborn inflation rules out entering into an explicit monetary easing cycle (interest cut).

Given the closure of many American markets on Friday, the current week will provide greater liquidity for traders to express their views regarding this shift; Away from the risks of an immediate increase and towards a slower and conditional monetary policy path until the end of the current twenty-first year.

Reading between the lines

This week, investors are awaiting the release of the minutes of the recent meetings of the US Federal Reserve on Wednesday and the European Central Bank on Thursday.

The analysis said: "These books will help markets assess the sustainability of the recent hawkish tone of these two large central banks".

The minutes of the Federal Open Market Committee cover the June 16-17 meeting, the first under Warsh’s presidency, in which it was decided to keep interest rates unchanged at a range of 3.50% to 3.75%.

Attention will focus on the extent of members’ desire to continue monetary tightening before the release of weak jobs data last Thursday. The emergence of more details about whether officials are concerned about stubborn inflation or a slowdown in the labor market will either allay fears about the unemployment report or raise new, justified doubts.

On the other hand, the European Central Bank’s reports scheduled for Thursday will be no less important, especially after the Board of Governors raised interest rates by 25 basis points in June, bringing the deposit rate to 2.25%.

Markets will be looking for the extent of the division. Among officials regarding this decision, given that the European Central Bank was the first major central bank to start raising interest rates in the current session.

Moreover, attention will be directed towards knowing the extent to which this decision depends on the energy shock in the Middle East, and whether the recent decline in oil prices will give the European Central Bank room to maneuver and wait until September before taking any new step.

High expectations

This week begins the second quarter earnings announcement season, with the appearance of prominent names in the financial calendar such as Levi Strauss companies, PepsiCo, And Delta Airlines.

According to the analysis, after the strong upward run in global stock markets in the second quarter, investors are facing very high expectations to justify these recent price increases.

Early attention during the next two weeks of reports will focus on the banking sector and leading consumer companies, before the major technology companies reveal their results at the end of the month.

The analysis said: "Speaking of these ambitious forecasts, Facttest estimates S&P 500 companies’ earnings will grow by 23.3% year-over-year for the second quarter, up from the 18.8% estimated at the beginning of the quarter, with revenues growing by 12.2%."

The analysis prepared by Nick Spencer Skeen, Chief Executive Officer at Lunaro Financial Markets, added: "If this is achieved, it will mark the second consecutive quarter in which profit growth recorded levels above 20%, driven by the efforts of the energy and technology sectors."

The analysis stated that the repercussions of these expected profits will not only be limited to shaping the movement of stock prices, but will also be reflected in commodity markets such as gold, depending on the sensitivity of traders and their desire to shift towards safe haven assets to protect their investment portfolios.

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