In this week’s market update: Gold hits record highs, earnings updates come in from the big players in Silicon Valley and we wait to hear detail on the cost of removing Huawei from the UK’s 5G network.
There’s a very busy week ahead on the markets and it comes amid growing signs of investor unease, as the price of gold hit an all-time high.
Gold has risen to within striking distance of $2,000 for the very first time, suggesting that mounting fears of a Covid second wave and a deepening conflict between the US and China are sending investors in search of safe havens.
The price of gold, which investors traditionally flock to in times of uncertainty, hit a new all-time high of $1,980.57 per troy ounce in Asia on Tuesday. It went on to shed much of that gain,but having already jumped by more than 30% this year so far, it’s one of the best-performing asset classes. And given the uncertainty we’ve seen across the globe since the start of 2020, it’s perhaps little surprise that investors are keen to find a safe place for their money.
Gold has jumped about 9% in each of the past six trading sessions. The question is how high could the gold price go? Back in April analysts at the Bank of America gave a prediction that the price could get as high as $3,000 within 18 months. Another suggestion was that we could see it hit $5,000 an ounce some time in the next five years. The burning question right now though, for anyone yet to invest in the yellow metal, is more likely to be whether gold is now, already, too expensive to buy.
On the corporate earnings front we are due to get a raft of company updates from both sides of the Atlantic. In the week that a new share index focused on China's technology giants has been launched by Hong Kong's stock market, all the big names in US tech are due to post results. Look out for Apple, Facebook, Amazon and Google-owner Alphabet.
Apple, will as always, take centre stage on Thursday, with investors no doubt hoping for a revenue forecast in the wake of forced store closures and generally weaker consumer spending. But Amazon will also be very closely watched. A surge in demand for online orders during lockdown is likely to have proved a winner for Amazon which reports the same day.
Here in the UK the focus will be on the banks. Three of the big four - Barclays, Lloyds and Natwest - report this week, with HSBC due the following week. Investors will be paying close attention to the banks’ outlooks for the rest of the year. It will also be interesting to see what provisions are being made by them in anticipation of a potential fallout from an expected wave of bad loans made to businesses during the pandemic.
We’ll also get more on the impact of the global travel bans, which are proving to be increasingly stop/start as the beleaguered airline sector attempts to make a return to semi-normality. We heard from Ryanair yesterday. We’ll also hear from budget airline Wizz Air and we’ll end the week with figures from British Airways owner IAG on Friday.
For income seekers, attention will focus on whether Royal Dutch Shell will pay a dividend when it reports on Thursday. Shell, like the wider energy industry, has been rocked by the pandemic. In April it cut its dividend for the first time since the second world war after its earnings halved because of a collapse in energy demand and prices. Fellow oil majors ExxonMobil and Chevron report on Friday. Exxon is expected to post its second quarterly loss in a row, with Chevron also set to slide into the red.
There are also results due from a number of the companies at the forefront of the race to find a Covid vaccine. AstraZeneca, which recently released positive data from its phase 1 clinical trial results, is out on Friday. Today we hear from Pfizer, which is also working on a vaccine that has shown good signs of provoking a dual T-cell response.
Results aside, the big event in the US will be the US Federal Reserve meeting. No change to interest rates is anticipated, so the focus will be on any plans for additional economic stimulus when the two-day meeting concludes on Wednesday.
The Fed has already slashed interest rates to zero, pledged to buy an unlimited quantity of government debt and unveiled a series of emergency measures that include facilities to support the markets for corporate debt and municipal bonds. Stocks on Wall Street have climbed almost 50% since March as a result of the measures the US central bank has taken, but concerns remain about the sustainability of the recovery, with signs that it’s weakening.
Back in Europe, EU negotiator Michel Barnier and his UK counterpart David Frost are to meet for further discussions on the future relationship of the EU and the UK. Talks remain deadlocked on two sticking points — fishing rights and state subsidies — and so far there are no immediate solutions in sight.
And finally, just quickly going back to corporate results to keep an eye out for. UK telecoms provider BT is one to watch when it gives a trading update on Friday. We’ll be looking for any more detail on the cost of the removal of equipment made by Huawei, which the UK government has banned from 5G networks.