After a complicated week of continuous coming and going in the European and American stock markets, where the conflict in Gaza is conditioned by the nature of the prices of bonds, stocks, currencies, and raw materials, especially gold and oil, Investors face a new week to start very attentive to events in the Middle East. Due to the imminent operation on the ground in Gaza announced by the Israeli army, the biggest risk is its reaction, depending on its size, Iran, a country that has so far denied its involvement in Hamas terror attacks on Israel but has threatened to get involved if it deems Israel’s reaction “disproportionate”.
Last week the geopolitical tension that this conflict created noticed in the markets, especially in the bond market, which is the one that “sets the pace” for variable income. Although the sharp rise in crude oil prices is a clear inflationary factor, a fact that often penalizes the behavior of these assets, the high uncertainty created by the conflict created Bonds sometimes regain their role as “safe assets”, causing a significant and specific fall in their returns, all these fluctuations also create high volatility, in this market and the equity markets.
We understand that This volatility will continue in the coming days, at least until the progress of the conflict in Gaza becomes clear. However, even if investors and, therefore, the markets, continue to pay attention to this factor, the beginning of time of revenue release quarterly business reports, a period that began to pick up pace this week, will also focus your attention. Thus, and in various European markets, in the coming days, companies that are highly relevant to their sectors of activity will announce their figures for the last quarter, such as the company in the food sector of Switzerland. Nestle (NESN-CH), the Dutch manufacturer of equipment for the production of semiconductors ASML Holding (ASML-NL), the French luxury company L’Oreal (OR-FR), the Swiss pharmaceutical company Roche (ROG-CH), and the German software company SAP (SAP-DE). In the Spanish stock market, the publication on Wednesday of the quarterly figures for Cie Automotive (CIE) and Vidrala (VID) and Thursday the result of Bankinter (BKT) and Atresmedia (A3M).
Also on Wall Street, quarterly results have a relevant role, with companies as important Tesla (TSLA-US), Procter & Gamble (PG-US), Johnson & Johnson (JNJ-US), AT&T (T-US), Netflix (NFLX-US), Bank of America (BAC-US) and Taiwan Semiconductor (TSM-US) publishing its numbers in the coming days.
As we always point out, it is as important or more than the results achieved by the companies what your managers say about the future of their businesses in the coming quarters. Markets operate based on expectations, so these are estimates of the results to be announced by these companies. will determine how your actions will react in different markets. In this sense, it is worth noting that in recent weeks companies that “disappointed” investors by changing their earnings expectations downwards have been punished by the stock market, with a significant drop in their prices. In contrast, and as seen on Friday after the publication of the three major US banks in their quarterly numbers, When results and expectations are “similar”, investors usually choose to “reward” companies even in complicated times like these.
For others, note that this week’s macroeconomic agenda brings important appointments, such as tomorrow’s publication in the United States of retail sales and industrial production in September; on Wednesday a battery of economic figures on China, among them that of PIB dated 3Q2023as well as the reading of UK CPI in September and the last reading in the same month of this variable of Eurozone. In addition, on Thursday the 19th that is planned the president of the Federal Reserve (Fed), Jerome Powell, what will be his last intervention before the meeting to be held by the Federal Open Market Committee (FOMC) in early November. Markets will be listening closely to what Powell has to say to find out When the Fed ends its rate hike process or if, on the contrary, it leaves the “door open” to new action before the end of the year – the probability given by the markets that the Fed will raise its rates in November is low, even if The odds of doing so at the FOMC’s December meeting rose to 50%-.
At the beginning of the week, we hope that today is the day European stock markets are openly mixed without a fixed trend, with investors very attentive, as we have commented before, the development of events in Gaza. We need to closely monitor the behavior of bonds, the dollar, and the price of oil. Factors that have become the main references for the stock markets in recent days and that condition their behavior.