Morning Bid: Consumers in focus as Walmart reports

A look at the day ahead in European and global markets from Vidya Ranganathan.

Thursday’s corporate calendar features a host of earnings reports that will shine further light on the health of the global consumer, as U.S. retailers Walmart (WMT.N), Bath & Body Works and Macy’s (M.N) report earnings.

Expectations for Walmart ride high after peer Target (TGT.N) surged by almost a fifth on Wednesday in the wake of its consensus-beating holiday sales forecast and upbeat view of its supply chain.

Walmart is expected to report a rise in third-quarter sales powered by strong demand for its cheaper groceries and household essentials for inflation-hit Americans, so investors are looking beyond that to the company’s outlook for the holiday season and its comments on margin pressures.

That tricky inflation dynamic is also likely to show Bath & Body Works didn’t have such a great third-quarter and that customers cut down on non-essential items, such as its pricier home fragrances and personal care products.

Chinese e-commerce giant Alibaba Group will set the tone earlier in the day when it announces results, an update on its restructuring and investors hear from its new CEO, Eddie Wu, for the first time.

A bunch of central banks, including ECB President Christine Lagarde, speak at various events on Thursday against the backdrop of a growing consensus that major central banks’ policy tightening cycles are over, a conviction strengthened by recent inflation reports and other indicators.

Figures on Wednesday showed U.S. producer prices fell at their fastest pace since April 2020, and UK consumer inflation undershot all forecasts. Oil prices are now down more than 10% year-on-year.

With U.S. producer price data also reinforcing the disinflation theme, this week’s data has made financial markets certain that Fed Chair Jerome Powell will leave the Fed funds target rate unchanged at 5.25%-5.50% at the conclusion of next month’s policy meeting, according to CME’s FedWatch tool.

Meanwhile in Asia, Japan’s exports are struggling due to slumping China-bound shipments of chips and steel.

China’s October data shows a continued recovery in industrial output and retail sales, but enduring weakness in the real estate sector that remains a drag on the economy.

What’s propping up markets on the mainland however is the promise of bigger stimulus, and the central bank injected a large amount of cash via medium-term policy loans this week.

While markets didn’t react specifically to the news, investors also heard from the first meeting in a year between U.S. President Joe Biden and Chinese leader Xi Jinping on Wednesday, that the two leaders had agreed to resume military-to-military communications and cooperate on anti-drug policies.

Key developments that could influence markets on Thursday:

Data: U.S. weekly initial jobless claims, Oct industrial production, U.S. import and export prices

Speakers: Bank of England’s Randall Kroszner, ECB’s Christine Lagarde and Luis de Guindos, Fed’s Loretta Mester, John Williams and Michael Barr.

Events : APEC meeting of world leaders in San Francisco.

Earnings: Walmart, Applied Materials, Macy’s, Bath & Body Works, Gap, Siemens, SQM

Debt auctions: Reopening of 3-year, 4-year, 5-year, 13-year and 30-year France debt

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