What to Watch in the Week Ahead and on Monday, Nov 30
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Markets next week get a big dose of international developments before a swift pivot back to the United States - with the IMF's decision on inclusion of the yuan in its benchmark currency basket, along with meetings out of the European Central Bank and Swiss National Bank, both of which are expected to add more monetary stimulus just two weeks before the Fed is expected to raise interest rates. That should keep the dollar supported and boost U.S. bond yields ahead of Friday's jobs report, the last box to check off before investors agree that, yes, a rate hike is on the way. On Thursday, investors will also look at the Federal Reserve Chair Janet Yellen's testimony on the economic outlook before the congressional Joint Economic Committee. She also gives welcome remarks before the National College Fed Challenge Finals and speaks on the economic outlook before the Economic Club of Washington on Wednesday.
Investors will work through another spate of economic figures that include nonfarm payrolls, unemployment rates, ADP National Employment Report, auto sales figures, the Purchasing Managers' Index from financial data firm Markit and the Institute for Supply Management and numbers for durable goods. In data due on Thursday, the nonfarm payrolls are expected to have declined 200,000 in November and the unemployment rate is likely to keep the same pace like its previous month, when it hit a 7-1/2-year low of 5.0 percent. Meanwhile, private employers are likely to add 190,000 jobs in November, a report, due on Wednesday, is expected to show. Auto sales figures are due on Tuesday. Medtronic Plc, the largest standalone medical device maker, will report better-than-expected second-quarter profit on Thursday as the company reaps the benefits of buying Covidien and demand for its products rise in China. The company is expected to keep increasing its market share in China, a territory that has been challenging for other companies in the healthcare industry, such as drugmakers and nutritional product makers. Analysts will also be looking for comments to see if patients, who had put off optional procedures during the recent financial crisis, opt to have their surgeries regaining confidence from an improving economy and healthcare insurance coverage provided by Obamacare.
On Wednesday, the Federal Reserve Board Governor Daniel Tarullo participates in the Economic Growth and Regulatory Paperwork Reduction Act Outreach Meeting hosted by the Federal Deposit Insurance Corp, the Federal Reserve Bank of Philadelphia President Patrick Harker gives welcome remarks before "Bridging the Gap: Promising Approaches and Emerging Practices for Addressing Youth Unemployment" forum hosted by the Federal Reserve Bank of Philadelphia and the Federal Reserve Bank of San Francisco President John Williams speaks on the economic outlook before a meeting of Portland community leaders. On Tuesday, the Federal Reserve Bank of Chicago President Charles Evans speaks on current economic conditions and monetary policy before the Lansing Regional Chamber of Commerce Economic Club Luncheon. Separately, the Federal Reserve Bank of Cleveland President Loretta Mester gives welcome remarks before the "Financial Stability: Policy Analysis and Data Needs" conference sponsored by the Federal Reserve Bank of Cleveland and the Treasury Dept. Office of Financial Research on Thursday. The Federal Reserve Vice Chair Stanley Fischer also speaks on the same day on "Financial Stability and Shadow Banks" before the Federal Reserve Bank of Cleveland Financial Stability Conference. On Friday, the Federal Reserve Bank of Minneapolis President Narayana Kocherlakota speaks on "Monetary Policy Renormalization" before "The New Normal for the U.S. Economy" forum hosted by the Federal Reserve Bank of Philadelphia.
Discount retailer Dollar General Corp's same-store sales are likely to come in below analysts' estimates for the third quarter on Thursday, hurt by clearance activity at Family Dollar, which was acquired by Dollar Tree this year. The deal also dislodged Dollar General from its No.1 U.S. discount retailer status. However, the company's expanded assortment of health and beauty products and sales of popular licensed items such as Star Wars toys is expected to have boosted sales in the quarter. Chipmaker Marvell Technology Group Ltd is expected to report third-quarter results below analysts' average estimates on Thursday, according to Thomson Reuters StarMine, hurt by weak demand for its chips used in PCs and third-generation mobile phones. Investors would look for any comment about the health of its PC-chip business and whether the company needs to trim its workforce further. Cloud storage provider Box Inc is expected to report third-quarter revenue slightly above analysts' average estimates on Wednesday, according to Thomson Reuters StarMine data, as more users sign up for its services. Investors will be looking out for Box's outlook to see if the company is able to maintain its growth momentum and gain subscribers from rivals. Teen apparel retailer American Eagle Outfitters Inc is expected to report third-quarter profit and sales above analysts' estimates on Wednesday, according to Thomson Reuters StarMine. The earnings beat is expected to be driven by strong demand for its American Eagle and Aerie brands, coupled with fewer discounts. Investors will look for forecast for sales in the holiday quarter and commentary on promotions and trends. Another teen apparel retailer Aeropostale Inc is expected to report a loss for the 12th straight quarter. The company has been steadily narrowing its losses as it clamps down on discounts. In the last four months, the troubled mall-based retailer has received two notices from the New York Stock Exchange as it failed to satisfy listing requirements. When the company reports its third-quarter results on Wednesday, investors will look for forecast and commentary for sales in the holiday quarter. The ECB is almost certain to ease policy but what measures it will take is up in the air and will be closely looking by the investors on Thursday. The Governing Council is expected to debate a wide range of options, from a fairly uncontroversial deposit rate cut to a highly unorthodox scheme to buy up bundled non performing loans. Markets expect the bank to settle on a 10 basis point rate cut, a slight increase in monthly asset buys and a modest extension of the quantitative easing programme. However, given the wide range of options on the table and the ECB's practice of overdelivering, a surprise is highly likely. ECB publishes Target 2 balances on Tuesday. The Target 2 system facilitates payments between banks in different euro zone countries by channeling them through each national central bank's account at the ECB. Cross-border payment imbalances increased during the 2010-2012 euro zone debt crisis as the private sector withdrew capital and banks turned to the ECB for funding because banks from the stronger economies stopped lending to them. Italian and Spanish net liabilities have declined from their 2012 peak while Greece's have increased again since late 2014, along with political uncertainty in the country. The ECB said it would now publish Target 2 data on the first working day of every month, albeit with a one-month time lag.
Department store Sears Canada Inc is expected to post a rise in third-quarter same-store-sales on Thursday, which has been falling for two years. Investors will be interested to know how the struggling store operator plans on increasing profit from operations, besides selling assets and units. Investors are also interested in how and when the company plans to settle all the pending law suits against it. On Wednesday, major fertilizer companies present at a Citi investor conference in New York amid slumping fertilizer prices and profits. Of interest will be CF Industries' comments on a U.S. legislation that could scuttle the benefits of tax inversions. The company is in process of acquiring some assets from OCI and switching its tax address to the United Kingdom. Canada is heading into a busy week that includes reports on growth, trade and the jobs market, as well as an interest rate decision from the Bank of Canada. The gross domestic product report on Tuesday is expected to confirm that the economy pulled out of recession in the third quarter, with growth forecast to ramp up to a 2.3 percent annualized rate. However, monthly figures are expected to show no growth for September, suggesting the third quarter ended on a weak note. The jobs report is due on Friday, with the labor market expected to have shed 2,900 jobs in November, pulling back from a temporary boost in October due to the federal election. Also on Friday, the October trade deficit is seen widening modestly. The Bank of Canada will make its interest rate decision on Wednesday. The central bank is widely expected to hold interest rates at 0.50 percent, after cutting rates twice this year to offset the shock to the economy from the drop in oil prices. Brazil's economy probably shrank at the fastest annual pace on record in the third quarter, crippled by a combination of government budget cuts, rising inflation and political gridlock. On Tuesday, the gross domestic product in Latin America's largest economy likely contracted 1.2 percent in the third quarter from the second after seasonal adjustments, following a decline of 1.9 percent between April and June. Also, data on industrial output for October and auto sales figures are due on Thursday and Friday, respectively. Meanwhile, Peru's statistics agency will issue monthly inflation rate for November. Separately, the closely watched survey of economists by the Mexico central bank sheds light on analyst expectations for growth and inflation on Tuesday.
ON MONDAY, NOV 30 The National Association of Realtors issues data on pending home sales for October. Contracts to buy previously owned U.S. homes are likely to have increased 1.5 percent in October, compared to a fall of 2.3 percent in September. (1000/1500)
The International Monetary Fund is expected to add China's yuan to its benchmark currency basket at a board meeting in a symbolic win for Beijing. Adding the yuan to the Special Drawing Rights basket would mark the biggest change since 1980, when the number of currencies in the basket was cut from 16.
The Federal Reserve Board of Governors holds open meeting to discuss a final rule to implement the Dodd-Frank amendments to the emergency lending authority under Section 13(3) of the Federal Reserve Act. (0830/1330) Ford plans a conference call to discuss the recently ratified contract with the United Auto Workers, which represents about 53,000 workers at Ford U.S. factories. The company could also discuss more details of its planned $9 billion investments in U.S. operations. After similar effort that failed in Copenhagen in 2009, a UN global summit in Paris aims to strike binding agreement under which 195 countries commit to curb carbon emissions by specific amounts in a drive to keep the rise in the average world temperature to a maximum 2 degrees; large number of world leaders are expected to attend the opening and perhaps closing moment of a conference that will involve some 40,000 guests/negotiators over a period of two weeks. The Paris Climate Change Conference will take place from Nov. 30 to Dec. 11.
Statistics Canada issues figures for current account. Canada's current account deficit is expected to have narrowed in the third quarter to C$15.15 billion. (0830/1330) Brazil's central bank releases its monthly report on the federal budget. The primary balance is a gauge closely watched by investors because it measures a country's ability to service its debt. Separately, Chile's government will release jobless figures for August-October. Unemployment has stayed low through the recent slowdown. The country's statistics institute will also issue factory output for October. Investors will be looking for signs as to whether economic recovery is gaining traction and in which sectors. Meanwhile, Argentina's government is due to release October industrial production data. LIVECHAT - FX WEEK AHEAD with Reuters FX analyst Jeremy Boulton and GLOBAL FLOWS with Lipper Join Reuters FX analyst Jeremy Boulton at (0500 ET/1000 GMT) for a look at the week's top topics and implications for the FX market. Separately, Lipper analyst Jake Moeller discusses latest industry data, looking at mutual fund closures, launches and mergers. To join the Global Markets Forum, click here bit.ly/1kTxdKD (Compiled by Sourav Bose in Bengaluru)
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