A 1st Summer FOMC Meeting: Global Week Ahead (2024)

In the Global Week Ahead, the world’s stock and bond traders get to inspect:

  • A U.S. Federal Reserve
  • A Bank of Japan meeting, plus
  • A G7 gathering focused on Ukraine funding, and a looming peace summit

Plus, May U.S. Consumer Price Inflation (CPI) and U.K. jobs data are all coming up — and that's not all.

In Europe, markets will digest results from the June 6th - 9th European Union election.

Britain's Labour Party is expected to unveil its policy plans ahead of a July 4th election it is tipped to win.

Next are Reuters’ five world market themes, rank-ordered for equity traders.

(1) On Wednesday afternoon, the June 11th – 12th FOMC policy rate meeting ends.

The Fed looks certain to hold rates steady when it ends a two-day meeting on June 12th.

Inflation has cooled after aggressive rate hikes starting in 2022 but has not yet fallen to its +2.0% target.

May inflation figures are released just hours before the Fed June statement.

Further signs of inflation easing could cement expectations for rate cuts, especially given signs of economic weakness.

Wall Street, boosted by cooling inflation, will be watching closely. Traders continue to price in some monetary easing this year, with even some slim hopes of a July cut.

A bad inflation miss could spook investors and bring back recession fears that have laid dormant for months.

No doubt, the data could fire markets up ahead of Fed Chair Jerome Powell's post-meeting press conference.

(2) On Thursday-Friday, a Bank of Japan (BoJ) policy meeting follows the FOMC.

Bank of Japan Governor Kazuo Ueda has already dropped a strong hint of what to expect at June's meeting.

He said on Thursday that it would be appropriate to reduce still-massive bond purchases as the BOJ exits decades of stimulus, stressing policymakers will move "cautiously" on rate hikes after delivering its first rise since 2007 in March.

A consensus is building for some kind of taper of long-running quantitative easing when the BOJ concludes its two-day gathering on June 14th.

Mizuho Securities sees a good chance of a 1 trillion yen ($6.4 billion) cut in monthly purchases to roughly 5 trillion yen per month, which could be weathered by bond markets.

Whether that supports the battered yen is a separate matter, with the BOJ and government concerned a weak currency could derail a hoped-for cycle of mild inflation and steady wage gains.

(3) Starting Tuesday, key U.K. macro data lands. The Labour manifesto is out.

Labor market data on Tuesday is in focus for U.K. investors assessing whether wage pressures are easing fast enough to make a Bank of England rate cut a near-term prospect.

Average weekly earnings, excluding bonuses, rose by an annual +6.0% in the three months to March, and April's +9.8% increase to Britain's minimum wage may push that growth rate higher.

Until recently, economists expected a June rate cut, but persistent inflation pressures mean markets do not fully price in a move until November.

Wednesday's April GDP data is likely to show growth softened after a robust 0.6% expansion in Q1. S&P says PMI data points to 0.3% growth for Q2 overall.

And the opposition Labour Party launches its manifesto ahead of the July 4th election.

While polls suggest Labour will hammer Prime Minister Rishi Sunak's Conservatives, some business leaders doubt Labour can turn around Britain's recent weak growth performance.

(4) A G7 meeting, in front of a Ukraine peace summit in Italy, hits late in the week.

Leaders of the Group of Seven are pushing for progress on how to funnel urgently needed funds to Ukraine at a June 13-15 meeting in Bari, Italy, before they head to Switzerland for the peace summit on June 15-16.

The push follows a recent E.U. decision to use the annual flow of windfall profits earned on immobilized Russian assets.

A loan backed by the income from frozen assets could provide Kyiv with as much as $50 billion in near-term funding and has emerged as one top option.

Concerns by G7 policymakers over China's growing export strength, dubbed "industrial overcapacity,” particularly regarding new energy vehicles, is also in focus.

The G7 meets just after E.U. elections and will be the first time a number of key E.U. figures get the chance to discuss the possible division of spoils.

(5) Taylor Swift shows happen in Western Europe.

It's Europe's turn to benefit from music superstar Taylor Swift's Eras Tour, hitting Britain in coming days, then the Netherlands and Switzerland.

Barclays reckons the tour could provide an almost one billion pound boost to Britain's economy, with spending by ticket holders more than 12 times the average cost of a UK night out.

The Bank of America Institute says the tour's opening leg in Paris sparked a 22% year-on-year jump in international BofA card spending in the French capital May 9-13.

The spending boost, even if temporary, suggests service-sector inflation could remain sticky for longer.

Some reckon the real winner is Swift: the Eras tour made her a billionaire in October, Time magazine reported.

And this won't be the last time economists debate "Swiftflation" and “Swiftonomics.”

Zacks #1 Rank (STRONG BUY) Stocks

Let’s explore three ‘hot’ info tech sector stocks this week.

(1) GE Aerospace (GE - Free Report) : This is a $160 stock, found in the Transportation – Airline industry. It has a market cap of $177.9B. I see a Zacks Value score of D, a Zacks growth score of D and a Zacks momentum score of C.

A 1st Summer FOMC Meeting: Global Week Ahead (1)
Image Source: Zacks Investment Research

GE Aerospace (erstwhile General Electric Company) is a leading designer, developer and producer of jet engines, components and integrated systems for military, commercial and business aircraft.

The company is well-known for its aero-derivative gas turbines for marine applications. Its zeal to invest in upgrades and innovation of products along with outstanding service capabilities and technological expertise raises its competitive appeal.

Founded in 1892, General Electric (now GE Aerospace) is currently headquartered in Evendale, OH. The company operates its businesses in the United States, Europe, Asia, the Middle East and Africa, and the Americas.

Its products and services range from jet engines like LEAP, GE9X & GEnx, airframes, avionics systems, aviation electric power systems, turboprop engines, engine gear, and transmission components and services among others.

In April 2024, GE Aerospace emerged as a separate public company, following the spin-off of GE Vernova business from General Electric. This marked the completion of General Electric’s multi-year portfolio restructuring actions, separating into three stand-alone publicly-traded companies.

Over the years, General Electric conducted several restructuring actions to significantly boost its businesses and financial position. In November 2021, the company completed the divestment of the GE Capital Aviation Services business to AerCap Holdings N.V. Also, in January 2023, General Electric spun off its healthcare business, GE HealthCare, into a separate public company.

GE Aerospace currently operates as an aviation-focused company, under the following businesses:

Commercial Engines and Services: It offers jet engines for commercial airframes, which power aircraft across all categories including narrowbody, widebody and regional. It also provides maintenance, component repair and overhaul services (MRO), including spare parts.

Defense: It produces jet engines for defense airframes, which power various types of defense aircrafts including fighters, bombers, helicopters, tankers, surveillance aircraft and marine applications

Systems & Other: It offers turboprop engines, avionics systems, aviation electric power systems, engine gear and transmission components, and services for commercial and defense businesses. It provides additive materials, additive machines and additive engineering services.

(2) Arista Networks (ANET - Free Report) : This is a $297 stock, found in the Communication - Components industry. It has a market cap of $93.2B. I see a Zacks Value score of F, a Zacks growth score of C and a Zacks momentum score of C.

A 1st Summer FOMC Meeting: Global Week Ahead (2)
Image Source: Zacks Investment Research

Santa Clara, CA-based Arista Networks, Inc. is engaged in providing cloud networking solutions for data centers and cloud computing environments. The company offers 10/25/40/50/100 Gigabit Ethernet switches and routers optimized for next generation data center networks.

Arista uses multiple silicon architectures across its products. At the core of the company’s cloud networking solutions is the Linux-based Extensible Operating System (EOS), which was architected to be fully programmable and highly modular.

EOS supports leading cloud and virtualization solutions, including Microsoft System Center, OpenStack and other cloud management frameworks. The company co-authored the Virtual Extensible LAN (VXLAN) protocol specification with VMware and was the first to demonstrate VXLAN integration. Moreover, it has now expanded VXLAN routing and integration.

In 2015, Arista introduced CloudVision, a network-wide approach for workload orchestration and workflow automation delivering a turnkey solution for cloud networking.

In 2019, Arista introduced 10 new 400G platforms. In the Leaf/Spine High Network Radix category, it offers two new fixed 32 port 400G switches, and a 128 port 100G/32 port 400G modular switch. For the Universal Leaf and Spine category of switching, the company introduced R3 series 100G and 400G products supporting up to 2.5M routes on its 7280R3 series fixed and 7500R3 series modular platforms.

Arista introduced a modular family called the 7800R3, a high density 100G and 400G platform supporting up to 460 Tbps of system throughput. Also, it launched the 720XP Series of fixed Power over Ethernet (PoE) leaf switches with 60W PoE, enabling it to offer a complete end-to-end solution for cognitive campus Ethernet as well as the introduction of WiFi-6 wireless Access Points (APs).

The company serves five verticals namely – cloud titans (customers that deploy more than one million servers), cloud specialty providers, service providers, financial services and rest of enterprise.

Arista’s customers include six of the largest cloud service providers based on annual revenues. In 2023, total revenues were $5.86 billion.

(3) Tokyo Election: (TOELY - Free Report) : This is a $111 stock, found in the Semiconductor -Discretes industry. It has a market cap of $105.3B. I see a Zacks Value score of F, a Zacks growth score of A and a Zacks momentum score of A.

Tokyo Electron Limited (TEL) is a company mainly engaged in the manufacture and sale of electronic products for industrial uses.

TEL is the largest manufacturer of IC and FPD production equipment in Japan and the third largest in the world.

  • The Semiconductor Manufacturing Equipment segment is engaged in the provision of coaters and developers for wafer processing, plasma etching equipment, thermal processing systems and others.
  • The Flat-panel Display (FPD) Manufacturing Equipment segment is engaged in the provision of coaters and developers for FPD manufacturing, plasma etching/ashing apparatus and others.
  • The Electronic Component and Information Communication Equipment segment provides semiconductor products such as integrated circuits (ICs), computer and network equipment and software.

In addition, the company is also involved in logistics, facility management and insurance businesses.

Key Global Macro

Wednesday’s FOMC regional bank ‘Dot Plots” are the main macro event.

On Monday, Japan’s GDP deflator for Q1 should be already out. +3.7% y/y is what is expected after a prior +3.6% y/y print.

On Tuesday, traders get the latest OPEC monthly global oil market report.

The U.S. NFIB business optimism index for May is out. The prior reading is 89.7.

On Wednesday, the U.S. CPI for May is out. +0.2% m/m is what to expect, following a +0.3% m/m in April.

The +3.4% y/y broad U.S. CPI mark should repeat. The ex-food & energy U.S. CPI should be +3.5% y/y, a notch down from +3.6% y/y in April.

The FOMC is expected to keep their policy rate at 5.33%.

The Fed does publish a new Economic Projections piece this month. That holds the ‘Dot Plots’, which will be the most important input here.

Chair Powell holds a presser too.

On Thursday, the Australian household unemployment rate should fall to 4.0% from 4.1% in May.

U.S. weekly jobless should remain low at 227K. The 4-week average is 222K.

On Friday, the Bank of Japan (BoJ) monetary policy statement comes out.


On June 6th, Zacks Research Director Sheraz Mian shared his latest thoughts—

“The market is starting to look ahead to the June-quarter earnings releases that will start coming out around mid-July.”

“But it is useful to discuss some of the notable trends that we saw in the Q1-24 earnings season and how estimates for the current period (Q2-24) are evolving.”

“The Retail sector earnings results showed that while sales are still growing, a reflection of a largely stable consumer spending backdrop, companies struggled to convert the top-line gains into profitability growth.”

“On a more basic level, retail companies found it hard to beat the Zacks Consensus estimates for EPS and revenues relative to other recent periods.”

“There are some ‘green shoots’ on the horizon, and not everything is bad for the retailers.”

“A number of retailers noted stabilization in the discretionary category of products that have persistently been under pressure in the post-Covid period.”

“Costco (COST - Free Report) reported positive comps for its discretionary categories while Target (TGT - Free Report) noted signs of stabilization in its discretionary product categories.”

“Costco and Target have a relatively higher income customer base and the overall spending trends for that income segment continue to be strong.”
“Costco and Target are hardly the only retailers that showed this favorable trend, as a number of other players also reported improving trends”

“There is undoubtedly stress at the lower end of income distribution, as would be expected after two years of inflationary pressures.”

“But even lower income consumers are still spending, as we saw with the Dollar General (DG - Free Report) earnings release.”

“That showed strong comps on the back of foot traffic partly offset by reduced basket size."

"Dollar General management attributes this behavior of more frequent visits and fewer items in the basket as reflective of financial stress.”

“For the current period (Q2-24), Zacks expectation is of earnings growth of +8.7% on +4.5% revenue growth.”

“The latest Q2 EPS estimates have held up very well, relative to other recent periods.”

That’s it for me.

Have an excellent trading week.

Warm Regards,

John Blank, PhD
Zacks Chief Equity Strategist and Economist

A 1st Summer FOMC Meeting: Global Week Ahead (2024)
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