Amazon earnings miss; NASDAQ 100 losing steam; IFO expectations showing turning point?

Amazon is the third largest component in the NASDAQ 100 Index with a 9% weight so the index will most likely be weighed down by Amazon in today’s session. Even before Amazon’s earnings the index looked like it was losing steam. For NASDAQ 100 to print a new all-time high it requires strong earnings releases from Apple, Facebook and Alphabet, all reporting earnings next week, that combined represent a weight of 25% of the index.

Yesterday’s France PMI figures for October indicated that economic activity is stabilizing in Europe and potentially Europe is getting closer to a turning point. The German IFO survey today shows better than expected expectations in October at 91.5 vs est. 91.0 and up from 90.9 in September. Maybe the green shoots are real. However, our view is that macro indicators are still too mixed to be calling for a turning point, so our expectation is still for the global economy to slow down further over the coming months. The potential catalyst for European equities is more momentum in European new car registrations, which just recently turned positive y/y again, and better numbers out of Asia. If the global leading indicators from OECD turn higher then the global economy is entering the recovery phase and as our table below shows, then European and Emerging Market equities are the most likely winners. Especially Swedish equities look interesting given their pro-cyclical nature and the Riskbank’s decision yesterday to take rates to zero which could add further tailwind to SEK in top of gains from a change in the business cycle. For foreign investors, Swedish equities could become one of the best equity markets next year.

Next week is the busiest in the entire earnings season with around 730 companies reporting earnings in the universe we track. The table below shows the 30 largest companies on market value reporting earnings. The key earnings to watch are Alphabet, Amgen, Merck, Pfizer, GlaxoSmithKline, Apple, Facebook, Sanofi, Bristol-Myers, Novo Nordisk and AbbVie. These are the bellwethers of the technology and health care sectors, the two largest sectors in global equity markets, and thus are very important for equity market direction and the potential for new highs.