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Earnings season picks up pace on Wall Street with Tesla and Netflix reporting their latest financials alongside a number of Dow components. Meanwhile the European Central Bank is all set to raise interest rates for the first time in 11 years. 

ECB 

The European Central Bank (ECB) is set to raise rates for the first time in over a decade as it seeks to tackle spiralling inflation. At its June meeting, the ECB confirmed it would raise rates by 25bps in July and hinted at a 50bps move in September. Minutes from the meeting suggest the ECB could opt for a larger initial hike. “A number of members expressed an initial preference for keeping the door open for a larger hike at the July meeting,” the minutes said. However, most policymakers believe the first hike needs “to be prepared and explained carefully”, which would indicate a move of just 25bps. 

Meanwhile markets have scaled back their bets for how far the ECB will go this year and next. Nomura economists believe the ECB will lift rates by 175 basis points through to March, but looming recession means the central bank will be cutting this time next year. 

Markets will also pay close attention to the ECB’s anti-fragmentation tool, which it will be crucial to its ability to raise rates and normalise policy. The tool will be deployed to keep bond spreads in check as the ECB raise rates. Investors and the ECB will also be keeping a close eye on Italian politics this week with uncertainty about the Draghi government seeing Italian bond yields spike higher. 

Tesla 

A tough quarter for Tesla seems assured. Layoffs and supply chain woes suggest it’s not been a record-breaker. Tesla announced weaker-than-expected second-quarter vehicle deliveries of 254,695, its first sequential quarterly decline in two years, well below the 310,000 vehicles delivered in the first quarter, 

JPMorgan cut its Tesla price target to $385 from $395 on the news, stating: “Lower production in Shanghai due to factors outside Tesla’s control is likely the largest contributor to the production shortfall pressuring deliveries during the quarter.” Analysts believe Tesla will report a $1.3 billion decline in profit from the first quarter. Q2 earnings will also be negatively impacted by an expected write-down on Tesla’s Bitcoin holding. 

UK inflation 

The latest inflation data for the UK will be closely watched by sterling traders. GBPUSD has fallen to 2-year lows and markets are increasingly worried about the economic outlook. CPI jumped to 9.1% in May and is expected to continue rising before topping out around 10% later this year. Last week Andrew Bailey, the governor of the Bank of England, struck a more hawkish tone. He said the Bank will act “forcefully” if necessary and that he uses that word because “we want people to see that there are more options on the table than another 25 bps”. 

 

Earnings calendar 

18.07  19.07  20.07  21.07  22.07 
Bank of America Corp (BAC) PMO 

 

Goldman Sachs Group Inc (GS) PMO 

 

International Business Machines (IBM) AMC 

 

 Johnson & Johnson (JNJ) PMO 

 

Netflix Inc (NFLX) AMC 

 

 

Tesla Inc (TSLA) AMC 

 

AT&T (T) PMO 

 

Philip Morris International (PM) PMO 

 

 American Express (AXP) PMO 

 

Schlumberger Ltd (SLB) PMO 

 

Verizon Communications Inc (VZ) PMO 

 

Economic calendar (BST) 

Sun Jul 17  11:30pm  NZD  BusinessNZ Services Index 
  11:45pm  NZD  CPI q/q 
Mon Jul 18  12:01am  GBP  Rightmove HPI m/m 
  All Day  JPY  Bank Holiday 
  9:00am  EUR  Italian Trade Balance 
  1:15pm  CAD  Housing Starts 
  3:00pm  USD  NAHB Housing Market Index 
  9:00pm  USD  TIC Long-Term Purchases 
Tue Jul 19  2:30am  AUD  Monetary Policy Meeting Minutes 
  7:00am  CHF  Trade Balance 
  9:30am  GBP  Average Earnings Index 3m/y 
    GBP  Claimant Count Change 
    GBP  Unemployment Rate 
  10:00am  EUR  Final CPI y/y 
    EUR  Final Core CPI y/y 
  1:30pm  USD  Building Permits 
    USD  Housing Starts 
  3:30pm  AUD  CB Leading Index m/m 
  Tentative  NZD  GDT Price Index 
Wed Jul 20  1:30am  AUD  MI Leading Index m/m 
  7:00am  EUR  German PPI m/m 
    GBP  CPI y/y 
    GBP  Core CPI y/y 
    GBP  PPI Input m/m 
    GBP  PPI Output m/m 
    GBP  RPI y/y 
  9:00am  EUR  Current Account 
  9:30am  GBP  HPI y/y 
  1:30pm  CAD  CPI m/m 
    CAD  Common CPI y/y 
    CAD  Median CPI y/y 
    CAD  Trimmed CPI y/y 
    CAD  Core CPI m/m 
    CAD  IPPI m/m 
    CAD  RMPI m/m 
  3:00pm  EUR  Consumer Confidence 
    USD  Existing Home Sales 
  3:30pm  OIL  Crude Oil Inventories 
  11:45pm  NZD  Trade Balance 
Thu Jul 21  12:50am  JPY  Trade Balance 
  2:30am  AUD  NAB Quarterly Business Confidence 
  4:00am  NZD  Credit Card Spending y/y 
  Tentative  JPY  BOJ Outlook Report 
  Tentative  JPY  Monetary Policy Statement 
  Tentative  JPY  BOJ Policy Rate 
  7:00am  GBP  Public Sector Net Borrowing 
  Tentative  JPY  BOJ Press Conference 
  1:15pm  EUR  Main Refinancing Rate 
    EUR  Monetary Policy Statement 
  1:30pm  CAD  NHPI m/m 
    USD  Philly Fed Manufacturing Index 
    USD  Unemployment Claims 
  1:45pm  EUR  ECB Press Conference 
  3:00pm  USD  CB Leading Index m/m 
  3:30pm  NAT GAS  Natural Gas Storage 
Fri Jul 22  12:00am  AUD  Flash Manufacturing PMI 
    AUD  Flash Services PMI 
  12:01am  GBP  GfK Consumer Confidence 
  12:30am  JPY  National Core CPI y/y 
  1:30am  JPY  Flash Manufacturing PMI 
  7:00am  GBP  Retail Sales m/m 
  8:15am  EUR  French Flash Services PMI 
    EUR  French Flash Manufacturing PMI 
  8:30am  EUR  German Flash Manufacturing PMI 
    EUR  German Flash Services PMI 
  9:00am  EUR  Flash Manufacturing PMI 
    EUR  Flash Services PMI 
  9:30am  GBP  Flash Manufacturing PMI 
    GBP  Flash Services PMI 
  1:30pm  CAD  Core Retail Sales m/m 
    CAD  Retail Sales m/m 
  2:45pm  USD  Flash Services PMI 
    USD  Flash Manufacturing PMI 

 

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