INSUBCONTINENT EXCLUSIVE:
LONDON (Reuters) - Following are five big themes likely to dominate thinking of investors and traders in the coming week and the Reuters
The selloff in itself surprised no one; more interesting was the suddenness and the apparent lack of triggers.
It was a milestone week
Fed, rising dollar, escalating trade war, slowing China and fragile emerging markets
off.
The million (or trillion) dollar question now is: is this the major correction many people have been flagging for months, if not years
Or not The coming week may show.
2/UN-FAIRThousands of Chinese exporters descend on the Canton Trade Fair in the coming week to strike
deals, sell their wares and, this year, whine about the heavy tariffs the Trump administration has imposed on their United States sales.
At
approaching the 7-per-dollar mark.
Calling out Beijing as a currency manipulator may give Washington more firepower in its trade dispute
But there is also the issue of the $1.17 trillion in United States Treasury bonds held by China
Selling those holdings might mean short-term losses for China but could bring a fresh jump in bond yields and an even higher dollar
That would in turn put United States exports at a further disadvantage against Chinese, and more generally, global goods and services.
3/NO
QUARTER GIVEN Investors have punished United States bank shares this year, with the SP500 banking index down 5 percent year-to-date versus
a 2 percent gain for the broader market
So sector giants JPMorgan, Bank of America, Bank of New York Mellon, Goldman Sachs, and Morgan Stanley will need some pretty strong Q3
earnings if they have any hope of changing that negative view.
They are indeed expected to deliver 26 percent earnings growth, outstripping
the 21.4 percent predicted for the SP500 according to I/B/E/S Refinitiv
But as the Fed raises interest rates, banks will be pressured to pass on those higher rates to depositors
And loan growth remains sluggish, seemingly impervious to big recent tax cuts, and a worry if the economy indeed slows down next year as
many expect.
Share performance may boil down to valuation
For the next 12 months, Goldman Sachs appears the cheapest, with investors paying $8.90 for every dollar in expected earnings while they pay
$11.90 for Bank of New York Mellon
The latter, unsurprisingly, is the worst performing stock over the last two years in this group of United States banks.
4/A PLUMMET AFTER
THE SUMMITSterling has strengthened 2 percent versus the dollar over the last fortnight, supported by expectations that an EU leaders summit
18 will yield a deal on Brexit for British Prime Minister Theresa May
If the outcome is positive, investors could unwind more of their short sterling bets, setting the currency firmly on the road to
recovery.
But with less than six months to go before Britain leaves the bloc, fears about the Irish border issue will still hound the pound
budget should any deal split Northern Ireland from the British mainland
But the DUP could well scupper that rally if it triggers new elections
For now, though, currency markets appear priced for a deal being finalised next week
of losing investment grade status and the billions of euros of fund flows that go with it.
Not that the saga ends on Monday
first step is a significant one, and likely to give investors an idea of whether Italy and the EU can work together to come up with a
