Week Ahead: FOMC minutes, Walmart earnings, next PMI round in focus

US discounters Walmart and Target, and home improvement retailers Home Depot and Lowe’s report their earnings this week. With the exception of Target, these stocks have dramatically outpaced the S&P 500 this year. The global monetary policy outlook also gets an update this week thanks to minutes from the FOMC, ECB, and RBA, while flash PMIs for August will help shape the Q3 growth outlook.

Earnings: Walmart, Target, Home Depot, Lowe’s

Discounters like Walmart and Target, and home improvement retailers Home Depot and Lowe’s have raced higher since the market bottomed-out in March. Walmart is 11% above 2020 opening levels, although that pales in comparison to Home Depot’s 28% surge and Lowe’s 30% rally. Target is the exception, although with year-to-date gains of 5% the stock is still fractionally outperforming the wider market.

According to Bank of America analysts, Target and Walmart could post strong earnings, thanks to broadened revenue streams, a timely shift to eCommerce, and shrinking expenses – with Q1 bearing the brunt of Covid-related costs.

Home Depot and Lowe’s have raced higher as investors bet on strong demand from consumers fed up of the homes they’ve been stuck inside for months. Both were able to stay open in Q1 while other businesses had to close, helping boost sales growth. Markets will be looking to see whether this moderated in Q2 as a whole as other firms opened their doors.

FOMC and RBA minutes, ECB accounts

We’ll get plenty of insight into the current state of mind of the world’s central bankers this week thanks to the latest meeting minutes from the Federal Open Market Committee, European Central Bank, and Reserve Bank of Australia.

The Fed, ECB, and RBA all left policy unchanged at their most recent meetings while reiterating their commitment to doing whatever it takes to keep the economy supported. The minutes will provide more information on their respective outlooks and how concerned policymakers are over second-wave risks.

Flash PMIs to help shape Q3 outlook

Now that the Q2 GDP data for the world’s major economies is in (in preliminary form at least), the focus can turn to the outlook for Q3. The next set of flash PMIs from Markit cover August, and will help to shape expectations of the pace of recovery this quarter.

The latest manufacturing, services, and composite numbers will be released for the Eurozone, UK, and US. July’s composite readings indicated economic activity in the Eurozone had expanded by the fastest pace in just over two years, while the UK expansion was the fastest since June 2015.

UK inflation, retail sales

Price growth in the UK came in slightly above forecast in June, rising from 0.5% to 0.6% on the year versus expectations of a slip to 0.4%. However, inflation is still running at a four-year low, and analysts do not believe June’s rise was the start of a sustained uptrend. Spare capacity in the economy is expected to keep a lid on price growth or see the rate slow even further.

Retail sales showed a larger-than-expected rise in June, jumping 13.9% on the month and following on from a 12.3% rebound in May. Despite the strength, many high street stores have announced jobs cuts recently. Data from the British Retail Consortium points to further sales growth in July, but with online still driving a huge portion of this the threat to the UK high street remains.

Highlights on XRay this Week 

Read the full schedule of financial market analysis and training.