U.S. corporate earnings get underway this week and investors could take some comfort from the fact that while they are likely to be bad, they may not be as bad as they have been. But earnings news could be overshadowed amid the runup to the Nov. 3 U.S. presidential election, as markets try to gauge prospects for an additional stimulus package from Washington. Reports on U.S. inflation, retail sales and jobless claims will be closely watched. Meanwhile the International Monetary Fund and the World Bank are to meet virtually and the Brexit saga rumbles on. Here is what you need to know to start your week.
- Bank earnings
After U.S. Q2 earnings results were better than expected, Q3 will show whether dire forecasts for companies’ bottom lines were justified.
Earnings season will get underway in earnest with results from some of the big U.S. banks, which are likely to have been hit by almost record low interest rates and the pandemic-induced recession.
JPMorgan (NYSE:JPM) and Citigroup (NYSE:C) are both due to release results on Tuesday, followed by Goldman Sachs (NYSE:GS), Bank of America (NYSE:BAC) and Morgan Stanley (NYSE:MS) later in the week.
In a break from the norm, guidance from U.S. companies has been more positive than negative and estimates have been improving in recent weeks to reflect more upbeat guidance. Whether that will be enough to support stocks in the weeks ahead remains to be seen.
- Stalled stimulus
U.S. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin failed on Friday to reach agreement on a coronavirus fiscal relief package, and Senate Majority Leader Mitch McConnell said he doubted that Congress would pass a package before the election.
Meanwhile, President Donald Trump said he would like to see a bigger stimulus package, after previously calling off negotiations. Trump appears to be hoping for an agreement on a stimulus bill before the election to help his re-election effort.
Roughly half of the 22.2 million people who lost their jobs in the initial stages of the pandemic remain out of work and economists are predicting a further slowdown in hiring through the rest of this year and into 2021, particularly without additional fiscal relief.
- Fedspeak, data
A lack of progress in stimulus talks may result in more bearish sounding remarks from several Federal Reserve officials set to make appearances during the week, including New York Fed President John Williams, Dallas Fed President Robert Kaplan and Minneapolis Fed President Neel Kashkari.
Fed Vice Chairs Richard Clarida and Randal Quarles are both due to speak Wednesday and Thursday at an event on the sidelines of the IMF meetings.
The U.S. is expected to release CPI figures on Tuesday and the weekly jobless claims report is due out on Thursday. While last week’s level of new claims was the lowest since March, they remain stalled at historically high levels after dropping below 1 million in August. Friday will see retail sales figures for September along with data on industrial production and consumer confidence.
- IMF meets virtually
The IMF and World Bank will hold their annual meetings online, but there is still pressing business to discuss.
Both organizations have called on the G20 group of the world’s largest economies to extend a freeze in debt payments from the world’s poorest countries that is due to expire at the end of this year.
More than 100 countries have requested financial assistance from the IMF and the demand for support could reach $100 billion.
Last week IMF Managing Director Kristalina Georgieva indicated that the fund would make a small upward revision to its global economic growth forecasts this week, but warned that while the global economy is in “less dire” shape than it was in June it still faced a “long and uneven” recovery.
- Brexit saga
The UK’s self-imposed deadline for a post-Brexit EU trade deal falls on Thursday and there is some faint indication that a bare-bones agreement could be reached. But is the end of the road in sight?
Negotiators have warned that a huge amount of textual work remains even if a deal is reached. Another report suggests the EU is preparing for negotiations to last until mid-November. Several sticking points remain.
The EU’s Oct. 15-16 summit will evaluate the progress. Sterling is on the rise meanwhile, but even if a deal is struck, the back and forth nature of Britain’s new relationship with the EU may continue to hold markets in its sway.