Mark Lister, 27 October 2020

Most global equity markets declined last week, with the S&P 500 in the US slipping 0.5%, the FTSE 100 in the UK down 1.0% and the European Stoxx 600 falling 1.4%. Australian shares fell 0.2%, while the local NZX 50 bucked the trend with a 0.3% rise. The top performers in the NZX 50 were Fonterra (+7.1%), Kiwi Property (+6.8%) and Z Energy (+5.6%), while Serko (-3.9%), Sky City (-3.5%) and EBOS Group (-3.2%) lagged.

Many of the world's major economies continue to grapple with a resurgence of virus numbers, with US daily cases exceeding 70,000 for the first time since July. The increase that started in the Midwest drifting east to more highly populated US states. Many European countries, including France and Italy, have also posted daily records of late. In contrast, Singapore is returning to normal as new cases approach zero, and Australia is talking about reopening state borders in time for Christmas.

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In the week ahead, the global reporting season ramps up in a big way. It's another very busy week on the global reporting front, with about a third of the S&P 500 due to announce reports. Some of the heavyweights include 3M, Boeing, Caterpillar, Microsoft, Visa, Alphabet (Google), Amazon, Apple, Facebook and Starbucks. So far, a little over a quarter of the S&P 500 has reported, with 73% of companies beating revenue forecasts and some 84% exceeding earnings expectations. The aggregate earnings decline for the S&P 500 is currently tracking at -16.5%, which is an improvement on the -20.5% fall that was expected before the reporting season began. The CEOs of Facebook, Alphabet and Twitter are also expected to testify before a Senate hearing on misinformation and privacy on their platforms on Wednesday.

Brexit negotiations are ongoing, with discussions taking place daily as both sides try to finalise a deal by the middle of next month. The Bank of Japan and European Central Bank (ECB)are both set to meet this week. Some expect the ECB to deliver more stimulus in December, so markets will be looking for evidence its economic outlook has deteriorated enough to justify this.

China’s leaders will meet in Beijing from Monday to Thursday, to settle on the next five-year economic plan, among other things. Markets will be watching for changes to the growth target (which could be reduced or abandoned), plans for stockpiling of commodities China has a limited local supply of, and confirmation of existing policy settings that should ensure the yuan remains strong.

One of the highlights of the domestic week will be the final ANZ Business Outlook survey for October. The final ANZ Business Outlook survey is due for release on Thursday at 1:00pm, and we will be hoping the recent trends we have seen continue. The preliminary October release was very encouraging. It suggested that businesses were feeling much more upbeat than many would've expected, and that they see light at the end of the tunnel. The headline confidence index improved from -28.5 to -14.5, the strongest since December last year, while the more important Own Activity measure increased from -5.4 to +3.6, the best reading since February and higher than where it was through the middle of 2019.

Annual meetings from high profile companies like Freightways, Port of Tauranga and Tourism Holdings will also be of note. Friday will also see the release of the results from the two referendums that were voted on at the election. Across the Tasman, September inflation figures are due, while ANZ Bank and Resmed will report results.