The Davy Digest - 2nd September 2024

US equities edged higher last week. The main story of the week was the release of tech giant Nvidia’s earnings. Nvidia’s revenues more than doubled but the stock reacted negatively, due to the ever-increasing expectations placed on the company. The Fed’s preferred inflation measure, Core PCE, came in slightly softer than expected on Friday, causing equities to move higher. The main European indices recorded gains for the week, boosted by the tech sector. German inflation came in lower at 2.0% vs 2.3% expected, helping to pave the way for the ECB to cut rates in September. Keir Starmer agreed to sign a treaty with German Chancellor Scholz before the end of the year, aiming to boost business and trade relations between Europe and the UK. Chinese onshore equities ended the week lower, as investors continue to be disappointed by the Chinese Government’s efforts to stimulate the economy.

Last week's highlights

	US Consumer Confidence (27/08) - Rises to 6-month high of 103.3 in August. July Personal Consumption Expenditure Index (30/08) – Came in at 2.6%, slightly below 2.7% estimate.
	Economic Sentiment (29/08) – Rose to a 15-month high of 96.6. German Inflation (29/08) – Fell to 2% vs 2.3% forecast, paving the way for an ECB rate cut in September.  Unemployment Rate (30/08) – Below expectations at 6.4%
	Tokyo Consumer Price Index (29/08) – Inflation rose to 2.6% from 2.2% the month prior, potentially setting the stage for more interest rate hikes by the Bank of Japan.

Looking ahead to this week, the US manufacturing PMI for August will be released on Tuesday. Recent PMI surveys have shown weakness in the US manufacturing sector, with the July PMI coming in at 46.8 vs. 48.8 expected. On Friday, US nonfarm payrolls will be closely watched by investors for any further loosening in the US labour market. In Europe, retail sales for July will be released on Thursday after falling unexpectedly in June.  On Tuesday, Bank of England Deputy Governor Sarah Breeden will speak at a joint European Central Bank and European Banking Authority conference. Finally, in China, the Caixin manufacturing PMI was released this morning, it rose to 50.4 for August from 49.8 in July.

What's on the radar

	ISM Manufacturing PMI (03/09) ISM Services PMI (05/09) Nonfarm Payrolls (06/09)
	Eurozone Retail Sales (05/09)
	Bank of England’s Breeden speech (03/09)
	Caixin Manufacturing PMI (02/09) Caixin Services PMI (02/09)

Chart of the moment

European Earnings Momentum Building

Source: FactSet as of 30/08/2024.  YoY: Year over year    E: Estimates

• S&P 500:
  • The S&P 500 is on track to post 12.7% year-on-year earnings growth for Q2, with 79% of companies beating earnings estimates so far. This is above the 10-year average of 74%.
  • Companies in the Utilities and Financials sectors have beaten earnings estimates by the most.
  • Mega cap tech earnings have been strong in general, but companies have faced scrutiny on large increases in AI related spending.

• STOXX Europe 600 (includes UK):
  • The main European index is expected to post 3.7% year-on-year earnings growth for Q2, recording quarterly earnings growth for the first time since Q1 2023.
  • Companies in the Financials and Healthcare sectors have beaten earnings estimates by the most.
  • The momentum behind earnings growth in Europe is set to continue with earnings projected to accelerate further through the second half of the year.