CORRECTED-What to Watch in the Week Ahead and on Monday, June 29
(Corrects current estimate for the jobs report in paragraph 1 to 230k from 232k) WEEK AHEAD
Equities will focus on events on both ends of next week. This weekend's meetings on Greece will bring closer the answer to the "will they or won't they" question regarding their permanence in the euro zone. The jobs report at the end of the week will give more clues on the strength of the economy and the approach the Fed will take when rising interest rates. Any kind of Greek deal could boost equities and bring some relief for the euro, which is down 8 percent versus the U.S. dollar this year. The S&P 500 is within 2 percent of its record high, so that could be in play if Athens plays nice. In that scenario, and barring a very weak payrolls report, the yield in the 10-year Treasury note should test the 2.5 percent hit earlier this month which was the highest since early October. A Greek default, on the other hand would likely translate into selling of stocks across the board and also of the euro, though some analysts see the decline in the single currency as a chance to go long since it will be linked to one less of the weaker economies in the bloc. The reaction to the jobs report is slightly more complicated for stocks and currencies than for bonds. A strong report will likely be seen as a green light for the Fed to raise rates. A rate hike is priced in, but the expectation is for the Fed to be cautious as it continues to tighten policy. However, a gangbusters number (north of 275k or so, versus a current estimate of 230k) could be seen as pushing the Fed to a hawkish stance that makes a September policy move more plausible - and that could get in the way of more gains for stocks. A surprisingly low number could bring equities back to the "bad news is good news" dilemma and see Wall Street rally.
The monthly U.S. employment report, which will be released on Thursday due to a government holiday on Friday, is expected to show a respectable 230,000 jobs were added to nonfarm payrolls in June with the unemployment rate declining to 5.4 percent from 5.5 percent. That would probably keep economists converging on September as the likely interest rate lift-off date for the Federal Reserve. While the jobs report is always the highlight, the week provides ample fodder for investors to fine-tune their forecasts for economic growth and interest rates - from ISM's report on manufacturing for June, which is expected to show a strengthening in activity to ADP's June private payrolls report, a bit stronger as well, on Wednesday. Automakers will also report on June sales on Wednesday. They are seen cooling a bit after racing to their highest rate in nearly a decade in May.
General Mills Inc, the maker of Cheerios cereal and Betty Crocker cake mixes, reports fourth-quarter results on Wednesday. The company said it would cut 675-725 jobs in its international business under a new restructuring plan aimed at cutting costs and boosting growth. The company will also shut plants in Methuen in Massachusetts and Lodi in California under another restructuring plan, cutting about 680 jobs by the end of fiscal year 2016.
ConAgra Foods Inc, the maker of Slim Jim beef jerky and Chef Boyardee pasta, posts fourth-quarter results on Tuesday. Recently, activist hedge fund Jana Partners took a stake in ConAgra and said it was prepared to nominate directors to the company's board to help address "persistent underperformance" since the acquisition of RalCorp in 2013.
Federal Reserve Bank of St. Louis President James Bullard speaks before the "Emerging Leaders Venture Summit" on Tuesday, hosted by Active Capital and SixThirty in St. Louis, Missouri.
Constellation Brands Inc reports first-quarter results on Wednesday. The maker of Corona beer said in April it would spend more than $1 billion this year to expand its beer business. The company is also spending more than $2 billion on expanding its Mexican beer plant as demand for its Mexican beer brands increases from a growing Hispanic population in the United States. The company is expected to have benefited from higher sales of its brands such as Modelo Especial and Corona. Investors will look for comments on if the company benefited from improved consumer spending in the United States, and whether it expects higher spending on marketing and expanding its beer business to lower profit. Canada's economy is likely to have perked up at the start of the second quarter, with analysts forecasting 0.1 percent growth in April. The economy contracted in the first quarter at its sharpest pace in nearly six years as oil-exporting Canada was hurt by cheaper crude prices, but economists and policymakers expect growth will regain momentum as the year goes on. Still, second-quarter growth is likely to be modest at best.
On Thursday, Brazil's statistics agency, IBGE, releases May data for industrial production. On the same day, Brazil's government releases trade balance data for June. The HSBC Purchasing Managers' Index (PMI) for the Brazilian manufacturing sector will be issued on Wednesday. On Friday, HSBC's PMI for Brazilian Services will be released.
On Tuesday, Mexico's finance ministry will release the fiscal balance for May. On Wednesday, the Manufacturing PMI will show how the country's factory sentiment fared in June, after the indicator slipped to a seven-month low in May as output fell. Mexico's gross fixed investment figures for April will be released on Friday, after the indicator rose 4 percent in March from the prior month. On the same day, the central bank will release its survey of private sector analysts, who lowered their expectations for 2015 growth and inflation to 2.66 percent and 2.96 percent in the poll released earlier this month. Continuación...