Week in a Glance: 750 billion for the EU, US vs China, earnings

27 Jul 2020

The past week has been extremely successful for the euro. The reason for this, first of all, is the aid fund worth 750 billion euros. Instead of the prescribed 1 day, the EU summit lasted all weekend and even this was not enough to reach a compromise. It was only on Monday that the EU members came to an agreement: the total amount of grant aid was reduced from 500 to 390 billion euros, and the amount of loans is 360 billion instead of 250. The week ended with an additional injection of positive for euro: data from Markit indices in the Eurozone and Germany, were above 50 (means increase in the economic activity).

The problem of stimulus is now facing the United States. Moreover, the Republicans and Democrats have literally a few days left to reach a compromise. So far, their positions are quite distant: Republicans are ready to vote for a package of $ 1 trillion, and Democrats are insisting on $ 3 trillion. So, this week all attention will be focused on this topic.

The dollar, which was under the strongest downward pressure last week, canstop the fall this week. But for this, the United States must have a new stimulus package.

The main cause for concern of investors last week was another round of escalation in relations between the United States and China. The states ordered China to close the consulate in Houston, and China, in turn, ordered the United States to close the consulate in Chengdu. It is very likely that the sides will exchange new blows this week.

Earnings season is at its peak this week. Microsoft, Tesla, Intel, Twitter, At&T and many more reported last week. Airlines have routinely shown a drop in revenues by 80-90% and significant losses. Tesla posted its fourth consecutive quarter of profit, which gives it formal reasons for claiming a place in the SP500 index, although everyone understands that this profit is just on the paper, and the company itself continues to generate losses.

This week we expect quarterly results from the rest of FAANG members: Amazon, Apple, Alphabet, Facebook, and after that the earnings season will start to fade.

As for macroeconomic statistics, the week will be interesting primarily because of the US GDP data. Obviously, this will be the worst quarter ever. The question is how much. In addition, we are waiting for data on GDP in the Eurozone and Germany, as well as the announcement of the results of the FOMC Fed meeting. In general, the week will be extremely busy.