Weekly Market Recap
Leader of the pack
Week in review
- China PMI manufacturing slows to 50.3
- RBA policy unchanged, tapering bond purchases in September
- Australia building approvals -6.7% m/m for June
- Australia business and consumer confidence indices
- U.S. CPI inflation
- China CPI inflation
Thought of the week
The U.S. second quarter earnings season is proving to be another blockbuster but concerns are rising that corporate earnings are now cresting the peak. The question is whether it is now better to look towards markets where the earnings recovery has been lagging. The U.S. consensus earnings estimates for the next twelve months are currently 8% above the pre-pandemic level at the end of 2019. For Australia, the eurozone and the UK the figures are 10%, 5% and 1% respectively (see chart). The evolution in the earnings outlook comes down to each markets sector composition, as well as the prospects for economic re-opening. With earnings momentum still looking strong its difficult to underweight U.S. equities. However, a strategy that focuses on the return potential in non-U.S. equity markets, where the prospects for economic expansion and earnings catch up are greater, may generate stronger returns.
U.S. leading the earnings recovery
Consensus earnings per share, next twelve months, rebased
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