Markets are highly anticipating that the European Central Bank will further cut interest rates and accelerate the pace of rate cuts;
The US stock market Q3 earnings season is about to begin! Why is it considered a good thing that market expectations are not high;
Chinese investors will be greeted with economic data such as September retail sales and Q3 GDP;
The Paris Auto Show opens, with the U8 and Cybertruck making their debut in France.
Undoubtedly, the upcoming week is poised to witness many highlights in the capital markets: the European Central Bank is about to embark on a path of accelerated interest rate cuts that was unimaginable a month ago, the US stock market Q3 earnings season will unfold under the worried gaze of Wall Street, and Chinese stock investors will also face a decision on the next direction for the A-share market.
Let's briefly discuss the US stock market Q3 earnings season. There is a new situation in this quarter: Wall Street's strategic analysts expect this financial quarter to be the worst in terms of earnings growth in nearly a year. The expected earnings growth rate of the S&P 500 Index will only increase by 4.3% compared to last year. In the first three quarters of this year, this growth rate reached 9.8%, 13.1%, and 11.2%, respectively.This is not entirely a bad thing; low expectations can actually provide more room for upside, similar to how the same batch of analysts had expected only a 3.8% growth in U.S. stock profits for the first quarter of this year, but the actual figure turned out to be double that.
Following convention, the U.S. earnings season will be disclosed in the order of big finance → technology → various industries (and Chinese concept stocks). After JPMorgan Chase and Wells Fargo set a good start this week, more financial giants will disclose their earnings next week. Among the non-financial sectors, chip manufacturing concept stocks like ASML and TSMC may be of particular interest to Chinese investors.
For the U.S. stock market, after two years of consecutive growth led by the "Tech Seven," the market's focus has gradually shifted to the remaining "S&P 493." Strategists predict that these companies will achieve a 1.9% profit growth in the third quarter, and more importantly, there will be a noticeable acceleration afterward, with these stocks' profit growth reaching double-digit percentages in the first quarter of next year.
Research from Bank of America also shows that the implied volatility of individual stock performance after earnings announcements, as priced by the options market, has reached a new high since 2021. This means that this quarter's earnings season could become a "paradise for stock pickers."
From a more global perspective, this earnings season also needs to answer one question: after two full years of a bull market, what can justify another year of growth for U.S. stocks? Since mid-October 2022, the S&P 500, Nasdaq 100, and Dow Jones Industrial Average have achieved cumulative gains of 62%, 88%, and 46%, respectively.Jay Woods, Chief Global Strategist at Freedom Capital Markets, stated that a common saying on Wall Street is "the lifeblood of a bull market lies in rotation," which seems to be unfolding. Recently, the market has shifted its focus away from hyping large-cap technology stocks, such as the recent style switch to a rotation into utility stocks, as these stocks have risen due to the narrative of artificial intelligence driving electricity demand.
In contrast to the prospects of the U.S. stock market, the European market will focus more on risks. Just five weeks ago, European Central Bank officials were adamant that "interest rates will not be cut in October," but now the market not only highly anticipates that they will cut rates at the meeting next Thursday (October 17th), but is also increasing bets on the speed of the rate cut.
Peter Vanden Houte, an economist at ING Bank, once again lowered his economic growth forecast for the Eurozone in 2025 to 0.6% in his report this week. He also predicts that from now on, the European Central Bank should cut rates at every meeting until the deposit rate returns to 2%.
Back in China, investors will have a busy schedule next week, including industrial output and retail data for September, as well as economic data for the third quarter. At the same time, the 2024 Financial Street Forum Annual Conference will open on October 18th, with this year's theme being "Trust and Confidence - Jointly Discussing Financial Open Cooperation and Sharing Economic Stable Development."In addition to these significant economic agendas, there is also a series of noteworthy industry events to look out for next week. The Paris Motor Show will kick off next Monday and last for an entire week. At that time, French consumers will have their first glimpse of BYD's Yangwang U8, while Tesla will also use this opportunity to launch the Cybertruck to the European market.
Lenovo will hold the "Tech World 2024" event on Tuesday. In addition to the host, Lenovo has invited Nadella, Huang Renxun, Su Zifeng, Zuckerberg, as well as the CEOs of Intel and Qualcomm to attend and show their support.