David Ross

What I Think I Learned Last Week #1

The US economy grew at a 2.6% annual rate in the second quarter, a rebound following 1.2% growth in the previous quarter but slightly below consensus estimates of 2.7%.

The market viewed the Fed statement this week as being very dovish. I don’t know why. They signaled that they would start reducing their balance sheet in September, which is another step in monetary tightening. Yet, the dollar continued its free-fall, hitting 2-year lows against the euro as it passed the 1.17 level.

For some good news, US Consumer Confidence rose to a 16 year high as the strong job market keeps the consumer in good spirits.

What have second quarter earnings told us? Around the globe we are half-way through quarterly earnings. So far, 76% of US companies are ahead of expectations, which is typical for the US. Japan is running ahead its historical norm with 60% beating, while the rest of Asia is showing a whopping 59% below estimates. Emerging markets are in line with about 50% above estimates. Europe has been interesting to watch, coming in around its historical average of beats at 57%, but this is below what was seen in the first quarter. More disappointing has been the number of downward revisions while the full year expectations have remained at 10% in the face of what is assumed to be an improving economy.

Making Mexico Great Again: Mexico’s exports rocketed upwards, setting a new record high of $198 billion, during the first half of this year.

Labor shortages in Japan: The overall ratio of open jobs to applicants hit a 43-year high of 1.51 to 1 in Japan.

The difference between US and Europe? These stories from Monday mentioning the three most important companies that will be reporting earnings tell it all:
US: The world’s three most valuable internet companies — Alphabet, Amazon and Facebook — report earnings this week.
Europe: Total, Peugeot and Airbus are among the leading companies that will report over the next five days.

Technology giants vs. an oil company, a car company, and an airplane company. And that is why US stocks are more expensive than European stocks.

Amazon rules: About 700 US companies have reported quarterly earnings so far, and on 75 of those conference calls, Amazon’s name has been mentioned, according to Reuters analysis of call transcripts. The amazing part of this story is that retailers, who have been so damaged by Amazon, do not report until next month. Think about it. Amazon is such a force that over 10% of non-retail companies are worried about it.

Amazon is having a nationwide job fair this week. They are looking to hire 50,000 people and are willing to make offers on the spot.

Amazon and Facebook both passed the half-trillion market cap number this week, joining Apple, Microsoft and Alphabet (Google).

Oil is poised to post its first monthly gain of the year as West Texas Intermediate has jumped 7% this month on US inventories that have fallen for four straight weeks, OPEC capping Nigerian output, Saudi Arabia reducing exports, and the possibility of sanctions removing Venezuelan oil from the market.

Energy companies like Halliburton, Schlumberger, Exxon, Chevron, and ENI all reporting strong results. This along with the improving oil price should help turn sentiment more positive towards the group.

Are you kidding me? Later this year, Orange will roll out an online bank. The idea is that it will be a full-service bank. This would be remarkable given my experience with them as a no-service telephone provider. Actually, that is not fair of me to say. They would have had to improve immensely just to get to the level of “no-service.”

Some of the happiest days of my life, in no particular order:
– The day I got married
– The day my children were born
– The day I paid 143 euros so I could get rid of my Orange contract

And that is what I think I learned last week.

*Les informations sont fournies à partir des meilleures sources en notre possession. Elles ne sont pas constitutives d’un conseil en investissement ou d’une incitation quelconque à opérer sur les marchés financiers. Les opinions émises dans cet article ne sauraient en cas engager la responsabilité de LFDE.
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