What to Watch in the Week Ahead and on Monday, July 6
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WEEK AHEAD The Greek referendum on Sunday will determine the move on equities next week. A "YES" vote will keep headline risk high as new negotiations between Athens and its creditors take place and a new government begins to shape, with stocks hovering near current levels in increased volatility. A "NO" vote could be a repeat of last Monday's selloff as traders push the risk-off button and get out of the market's way while the future of Greece in the euro zone becomes more clear. The bond market is poised for possibly more gains if Greek voters reject the bailout terms on Sunday. More government debt supply and any upbeat domestic data would limit a price rise in Treasuries. On currencies, besides the referendum the dollar will have the minutes from the June Federal Reserve meeting to look forward to, after markets took Thursday's softer payrolls number as an indication that the Fed may push back its first rate hike in almost a decade. Any clue that a rate hike in September continues to be in favor will push the greenback higher. With the domestic economic news looking brighter even as the outlook from overseas deteriorates, Federal Reserve Chair Janet Yellen will give her views on Friday on the prospects for U.S. growth, inflation, and the job market amid keen global investor interest on whether she sides with the faction at the Fed who believe the central bank should raise rates just once this year, or with those who prefer two rate hikes. Her most influential colleagues are split on the issue, and her comments at the City Club of Cleveland, Ohio will be probed for clues on her stance. Separately, Federal Open Market Committee issues on Wednesday minutes from its meeting of June 16-17. On the same day, the Federal Reserve Bank of San Francisco President John Williams also speaks on the economic outlook before the International Conference of Commercial Bank Economists. (1400/1800) Meanwhile, Treasury Secretary Jack Lew participates in "Dodd-Frank at 5: a Conversation with Treasury Secretary Jacob J. Lew" at an event hosted by the Brookings Institution's Hutchins Center on Fiscal and Monetary Policy in Washington. Separately, Federal Reserve Bank of Kansas City President Esther George speaks on monetary policy and the economic outlook on Thursday before the Stillwater Economic Forum hosted by the Federal Reserve Bank of Kansas City's Oklahoma Branch. (1230/1630) Aluminum maker Alcoa Inc kicks off U.S. corporate second-quarter earnings season after markets close on Wednesday. Many aluminum producers have cut capacity or shut down completely as London Metal Exchange prices and falling physical premiums show no signs of improving amid rising exports of semi-fabricated products from China and high energy costs. Alcoa said it would close its Pocos de Caldas smelter in Brazil, which has a capacity below 100,000 tonnes per year. On Thursday, PepsiCo Inc is likely to report second-quarter profit and sales above analysts' average estimate, according to Thomson Reuters StarMine. PepsiCo's snack business, which includes Lays and Doritos chips, has been the driving force for the company for nearly two years as soda sales decline amid a general shift towards healthier drinks. The strong dollar, however, could take a bite out of profits, PepsiCo said in April and cut full-year revenue and earnings forecast by about 7 percentage points. Investors will be looking for comments on how PepsiCo plans to boost sales in its drinks business, especially after introducing a slew of new sodas such as aspartame-free Diet Pepsi and craft sodas with natural flavors. On Tuesday, the data from the U.S. Commerce Department is expected to show the U.S. trade gap widening to $42.3 billion in May from $40.9 billion in April when a temporary drop in imports shrunk the deficit. A wider deficit does not bode well for hopes that the U.S. economy was stronger in the second quarter. A stronger dollar has pushed slowed demand for U.S. goods by foreign purchasers, while imports have gone up. (0830/1230) Also, the Labor Department issues its monthly Job Openings and Labor Turnover Survey on the same day. (1000/1400) On Friday, the Commerce Department will also release data for wholesale inventories, which is expected to have increased 0.3 percent in May, at a slower pace than the previous month. (1000/1400) Statistics Canada issues trade data for May on Tuesday after posting a near-record C$2.97 billion of trade deficit in April. On Wednesday, Statistics Canada releases the value of building permits for May. (0830/1230) Also, the housing starts numbers for June are to be released on Thursday. (0815/1215) On Friday Statistics Canada will release the unemployment rate for June. Canadian jobs growth surged by the most in seven months in May. (0830/1230) Annual TD energy conference will start on Wednesday in Calgary. Companies including Cenovus Energy Inc, Suncor Energy Inc, Canadian Oil Sands Ltd, Crescent Point Energy Corp, Canadian Natural Resources Ltd and Husky Energy Inc will be taking part in panel discussion and giving investment presentations. Mexico's June consumer confidence data on Tuesday will show if sentiment has continued a recovery from a recent low. Inflation data for June on Thursday is expected to show the annual pace of consumer price gains in Latin America's No. 2 economy remains near a record low, giving policymakers room for keeping interest rates down. Industrial output data for May on Friday will show if oil production is continuing to slump as well as providing a reading on factory output, which has been shaky this year. ON MONDAY, JULY 6 The pace of growth in the U.S. services sector is expected to have slowed in June from the previous month. Analysts polled that the Institute for Supply Management's services index to have dropped to 56.3 in June from May's 55.7. (1000/1400) Also, financial firm Markit releases final reading of its Purchasing Managers Index for the services sector. (0945/1345) The South Carolina legislature meets to discuss possible law removing Confederate flag from the state house ground. The controversial battle flag which is widely associated with the southern cause of slavery during the 1860-65 Civil War has flown in front of the state Capitol since 2000 when it was removed from the building itself in a political compromise. Calls for it to be removed completely from all public spaces have mounted in the aftermath of the June 17 church massacre at Emanuel AME in Charleston. Ivey Purchasing Managers Index will show the pace of purchasing activity for June in Canada. It accelerated at a far faster pace than expected in May. The national automakers' association of Brazil releases the auto sales data for June. Separately, Chile's IMACEC economic activity index, encompassing about 90 percent of the economy tallied in gross domestic product figures is due to release. LIVECHAT: GREECE, NOW WHAT? With Ben May, senior euro zone economist, Oxford Economics The morning after the night before - and how big a hangover will Greece be facing? Ben May will join to discuss on what happens next in Greece after locals go to the polls in what is billed as a vote on creditors' bailout proposals, but in reality is seen as a vote on the country's future as a member of the euro zone. (0500/0900) To join the Global Markets Forum, click here bit.ly/1kTxdKD
(U.S. markets will remain closed on Friday, July 3, in observance of Independence Day.) (Compiled by Hardik Vyas; Edited by Don Sebastian)
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