Weekly Market Outlook

The schedule for this week is busy, so keep abreast of the highlights. This time, we start Wednesday, with Q2 results for UK banks, Facebook Q2 data, as well as the Fed Open Market Committee meeting. On Thursday, EU and Germany’s unemployment data, US second quarter gross domestic product and Apple’s earnings are on the agenda. Friday brings the EU second quarter GDP figures, followed by ExxonMobil Q2 earnings report.

UK banks results (Wednesday-Friday)

On Wednesday, the UK banks data are in focus, against the background of several years of uncertainty stemming from Brexit negotiations. The coronavirus pandemic has added to the hassles, and share prices have slumped to new multi-year lows. Banks like Lloyds and RBS were adversely affected by the country’s lockdown. Smaller UK banks had a rough period on the highly competitive market too. Some hope stems from the government’s assistance in keeping the economy afloat. However, the real problem still looms large, with big scale provisions for loan losses. The recent massive rise in unemployment will further aggravate the problem.

In spite of setting aside £2.1 billion for impairment provisions in the first quarter, Barclays has revenue streams from its investment division, which has started to show some solid performance in the recent quarters. This has helped the bank mitigate its underperformance in domestic retail operations. Barclays most recent trading update showed profits slumping to just below £1 billion. Revenues though still managed to make an impressive 20% rise to £6.3 billion.

Facebook Q2 Data (Wednesday)

Contrary to expectations, the first quarter of 2020 was a successful period for Facebook, which soared to record highs. Its profits doubled, and revenues went strong. The prerequisites for success include online gaming, video calling, and lots of messaging. The first quarter was a notable success, and Q2 is expected to continue the trend. But there is the unfavourable prospect of a repeated global lockdown, which could slow down the surge. Companies shrank their ads spending in Q1, and this is anticipated to have a marked impact throughout the second quarter.

Federal Open Market Committee Meeting (Wednesday)

The meeting is not expected to reveal significant policy changes. The rise in coronavirus cases may adversely impact the US economy, which has recently been recovering from the pandemic. The rebound may face impediments in the forthcoming months, such as lack of inflation and massive business defaults, as the recent Fed minutes indicated. The central bank’s focus has been primarily on employment, whereas inflation has been left rampant. Expectations are for a more relaxed attitude on long-term inflation goals, so rates are most probably to remain low for quite long.

EU and Germany June Unemployment Numbers (Thursday)

While unemployment figures for the entire EU, Germany included, are rather flexible, they are not precise. The reason is the unincluded data on workers who are currently not employed, or are not seeking jobs. May brought just a tiny rise in unemployment, which was quite of a surprise, given the economic shutdown everywhere. The June jobless claims data for Germany offered a surprising jump compared to March. July is not expected to offer surprises, as the slow recovery will most likely speed up job losses in different sectors of the economy.

Apple Q3 results (Thursday)

Apple performed gloriously in Q1, in terms of net income, revenues, and services. While Q2 figures are unsurprisingly expected to be less successful, the anticipated difference draws more interest. Q2 data really showed a decline, but not as much as expected. Whereas iPhone sales continued to diminish, service revenues went up. This trend is likely to continue in Q3, as streaming services soar further in popularity. To deal with the rough competition, Apple is moving away from high end devices to more budget models. What remains of interest is when a new 5G model is to be released, as the company does not have such a model yet.

US Q2 GDP (Thursday)

Following decline in the first quarter, US Q2 GDP is keenly awaited by investors and speculators alike. There has been a small rebound in payrolls data following April’s deep plummeting, and consumer spending patterns have also been going strong. However, the adverse economic situation in the US starting end of March and continuing until as far as May, has had its toll. So Q2 data are anticipated to deteriorate, with the contribution of the massively declining personal expenditure.

EU Q2 GDP (Friday)

After the decline seen in EU gross domestic product in the first quarter, Q2 data are anticipated to show a continued, even larger decline, with expectations of -30%. Despite the €750 billion pandemic recovery fund allotted by EU leaders being a helpful fiscal measure, the former is way below Germany’s stimulus plan for the country’s economy alone. So whether the fund can be the backbone of recovery, remains to be seen, yet it is highly unlikely.

Exxon Mobil Q2 results (Friday)

The plummeting of oil prices in the past several years has hit prominent companies in the industry, like Exxon Mobil. The company has not taken such vigorous measures to complement its core business with green energy projects, like some UK counterparts, BP and Royal Dutch Shell. The start of the year brought the company’s shares slump to the lowest levels since July 2002. The first quarter marked the company’s first loss in decades, as crude prices declined below $0.00, with oil demand plummeting to unprecedented levels. Q2 results are expected to trigger further pressure on Exxon’s share price, and the company is likely to write down long-term price estimates, like other peers in the industry. The demand for renewables is growing, but given the management’s slow reaction with respect to steering towards green energy, the concern for long-term prospects is grave.