Macro issues and a flurry of earnings updates in the US will be on investors’ radars in the week ahead.
Greece’s negotiations with European partners on reforms and debt look set to continue into the weekend. Economists at Investec warn failure to reach an agreement would leave Greek banks on the edge of collapse because they are currently reliant on emergency liquidity from the European Central Bank (ECB).
‘Our central case continues to be one of a last-minute deal, but we would concede that the risk of GREXIT has risen considerably,’ writes Investec economist Philip Shaw and his team.
Volatility in China, where markets fell 28% in a month, will also be brought into focus when the country reports second quarter GDP on Wednesday 15 July.
Quarter-on-quarter growth is expected at 1.5%, up from 1.3% in the first quarter.
US earnings season was kicked off by aluminium producer Alcoa (AA:NYSE) on Thursday 9 July and a further 33 announcements are expected next week. Shares in Alcoa gained 0.9% despite an earnings per share (EPS) ‘miss’ of 19 cents (12.3p), versus the 22 cents expected by Wall Street.
EPS across the benchmark S&P500 index is expected to decline 3% year-on-year because of falling profitability at energy companies. Excluding energy, EPS is forecast to gain 4.9%, according to Thomson Reuters data.
Sixty-seven per cent of consumer discretionary companies reporting early beat EPS estimates, according to the data, including cruise holiday specialist Carnival (CCL:LON), Nike (NKE:NYSE) and housebuilder Lennar (LEN:NYSE).
Big hitters start reporting on Tuesday, when results are expected from pharma giant Johnson & Johnson (JNJ:NYSE), top five global bank JP Morgan (JPM:NYSE) and US retail banking market leader Wells Fargo (WFC:NYSE).
Investors will also be looking for clues on the path of US interest rates when Federal Reserve chief Janet Yellen appears before the House Financial Services Committee on Thursday 16 July.