What to Watch in the Week Ahead and on Monday, June 30
Reuters
(The Day Ahead is an email and PDF publication that includes the day's major stories and events, analyses and other features. To receive The Day Ahead, Eikon users can register at . Thomson One users can register at RT/DAY/US. All times in ET/GMT) WEEK AHEAD The week of July 4 is generally a quiet one, and this promises to be no different. The lack of volatility should keep trading volumes low early in the week, with a final burst of trading to come when the jobs report is released on Thursday (instead of Friday) because of the holiday. Long-dated bond yields have trended lower, hitting three-week lows recently on a bit of rising concern about the Federal Reserve's plan to eventually tighten monetary policy and as economic growth still remains somewhat crimped. That, along with pension funds and other buyers, has actually served to support stocks - as a drop in yields makes the earnings yield on equities look that much more attractive.
Fed Chair Janet Yellen delivers a lecture on financial stability at the International Monetary Fund on Wednesday, and participates in a conversation with IMF Managing Director Christine Lagarde. The issue of whether financial stability should be one of Fed's mandates is a heated subject, even within the U.S. central bank, with some arguing that it should focus only on unemployment and inflation.
U.S. employment, manufacturing and services sectors data next week will likely paint a picture of a firming economy. The Labor Department is expected to report on Thursday that nonfarm payrolls increased 210,000 in June, the fifth consecutive month of job gains above 200,000. The unemployment rate is seen steady at 6.3 percent. On Tuesday, the Institute for Supply Management is expected to report that its manufacturing index rose to 55.9 in June from 55.4 in May. Its report on Thursday is also expected to show that its services industry gauge was unchanged at 56.3 in June from the previous month. While data on Tuesday is expected to show automobile sales moderating to a rate of 16.4 million units in June from 16.77 million units in May, the pace remains strong. Commerce Department data on Thursday is expected to show the trade deficit narrowing to $45 billion in May from $47.2 billion in April.
Constellation Brands, which makes Svedka Vodka and Robert Mondavi wine, is scheduled to report first-quarter results on Wednesday. The company had said that higher spending to increase capacity at a Mexican brewery would hit profits in the year ending February 2015. It is expected to have had exceptional quarterly sales of beers, an area where the company has been concentrating growth efforts as sales of its wines and spirits stagnate.
Payroll and human resources company Paychex has been rapidly expanding its presence in the Software-As-A-Service market to boost its payroll revenue. The company acquired cloud-based time and attendance company Nettime Solutions last month, its fourth acquisition since 2012. Paychex's results, scheduled for Tuesday, are expected to be in line with StarMine estimates, helped by higher payroll revenue as unemployment rate remains steady at a five-and-a-half year low of 6.3 percent.
The European Central Bank meets on Thursday and after last month's barrage of policy changes, it is unlikely to do much. Investors are still waiting for details of the new long-term lending program and ECB President Mario Draghi is bound to be bombarded at his news conference with questions about whether he is ready to launch money-printing quantitative easing.
Investors will be watching Canada's trade balance report later in the week, with the trade gap expected to shrink in May after unexpectedly falling into a deficit the month before. Canadian exports have disappointed since the financial crisis, but policymakers are looking for exports to become a driver of growth as the U.S. economy recovers.
HSBC PMI numbers from Mexico on Tuesday will gauge manufacturing sentiment for June, after the monthly indicator edged up in May, rising for a second month on improving new orders and employment despite a dip in output. A central bank survey of analysts due on Thursday will show whether a surprise 50 basis point cut in interest rates to a record low of 3 percent earlier this month has fanned inflation expectations or raised growth forecasts among economists, who last month predicted 3.85 percent annual inflation and 3.01 percent growth for the year. Data on Friday will show whether consumer confidence continued to climb in June after hitting a six-month high in May.
MONDAY, JUNE 30 Investors might get more clues on the direction of monetary policy when San Francisco Fed President John Williams, a centrist whose views sync closely with those of Yellen, addresses a group of bankers in Sun Valley, Idaho. In his last speech, Williams said the U.S. economy was about two years from normal employment and inflation levels.
In a relatively quiet economic week that will be punctuated by Tuesday's Canada Day market holiday, monthly gross domestic product report will be the highlight of the week. Canada's economy is expected to grow by 0.2 percent in April, with analysts hoping to see a pickup in the second quarter after growth slowed in the first quarter, partly due to severe winter weather.
High-profile attorney Ken Feinberg is expected to unveil the details of the General Motors compensation fund for victims of the defective ignition switch and their families. The event in DC will give details on who can file claims and how much they can ask for the deaths and injuries linked to the faulty part, which has led to the recall of 2.6 million cars and been linked to at least 13 deaths. Feinberg may also raise the number of deaths linked to the defective switch.
Data will show Mexico's fiscal balance for May, after the finance ministry achieved a surplus of 12.47 billion pesos in April. Separately, Chile is expected to report the jobless rate for March to May. Although there are signs it is beginning to creep up, unemployment in Chile was 6.1 percent in April, still close to historic lows. It also issues factory output and retail sales data for May. Recent months have shown either a fall or anemic growth at best in manufacturing output, while growth in retail sales, a mainstay of the economy, has slowed significantly. Still, authorities are forecasting a revival as the year progresses.
(U.S. markets will remain closed on Friday, July 4, for Independence Day. Canada markets will remain closed on Tuesday, July 1, for Canada Day.) (Compiled by Ayesha Sruti Ahmed in Bangalore; Editing by Kirti Pandey)
