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WEEK AHEAD
It's all about the U.S. Federal Reserve, or really, the aftermath. But the last several days of
jitters in the markets do suggest a real concern about the path of the global markets right now,
even after the Fed finally does raise rates by a measly quarter-point. The correlation between
oil and stocks has been very high, as the former has led the latter lower, and the lackluster
trade in the dollar serves as another expression of generalized concern about demand. Taken with
the yuan's steady slide of late, it appears investors are betraying some nervousness ahead of
the Fed's decision on Thursday. A big trunkload of options expiring on Friday could add to
volatility as well - that is, if the markets don't like what they hear from the central bank.
Investors will watch for a flurry of economic data next week, including Consumer Price Index on
Tuesday, data for housing starts and building permits along with industrial output on Wednesday,
and Purchasing Managers Index on Friday. Consumer prices likely increased by 0.4 percent, on an
annual basis, in November. Separately, groundbreaking is expected to have increased to a
seasonally adjusted annual pace of 1.14 million units in November from 1.06 million units in
October, while building permits are likely to show a 1.15 million-unit rate last month.
Meanwhile, industrial production is predicted to have dropped for the third straight month in
November, raising concerns for the robustness of fourth-quarter economic growth. Analysts expect
industrial production declined 0.1 percent last month. Meanwhile, financial firm Markit's
preliminary reading of its Purchasing Managers Index for the services sector is expected to come
in at 56.1 in December, same as its final reading in November.
Software maker Oracle (N:ORCL) Corp's second-quarter revenue and profit on Wednesday is expected to fall
marginally below analysts estimates, according to Thomson Reuters StarMine. Oracle has faced
only limited success in its small but fast-growing cloud business. Concerns also mount over the
company's core database business, which still accounts for the majority of Oracle's revenue.
Oracle's licensed software business has been falling for reasons ranging from slow customer
adoption to tough competition.
Consulting and outsourcing services provider Accenture Plc is expected to report first-quarter
earnings slightly above analysts' estimates on Thursday, according to Thomson Reuters StarMine.
The company is likely to benefit from growth in its high-margin consulting business,
particularly in North America. Investors will focus on the company's full-year outlook as rival
Infosys trimmed its full-year dollar revenue forecast in October.
Package delivery company FedEx Corp (N:FDX) reports its results for the second quarter on Wednesday.
Wall Street expects the company's earnings to rise to $2.53 per share from $2.16 a year earlier,
according to Thomson Reuters I/B/E/S.
On Friday, Federal Reserve Bank of Richmond President Jeffrey Lacker is part of an economic
outlook panel before the Charlotte Chamber of Commerce 2015 Economic Outlook Conference.
Carnival Corp (N:CCL), the world's largest cruise ship operator, posts fourth-quarter results on Friday.
Carnival (L:CCL) had forecast profit below analysts estimates, hurt by a strong dollar and sluggish
global economy. It had warned that geopolitical issues such as the migrant crisis in Europe
could pose a challenge to prices in the region. The Paris attacks in November are also likely to
have reduced bookings for cruises. However, demand from North America is likely to have been
high in the quarter.
General Mills Inc (N:GIS), maker of Cheerios cereal and Betty Crocker cake mixes, is expected to report
second-quarter profit slightly above analysts average estimate on Thursday, according to Thomson
Reuters StarMine. Investors will look out for further divestitures or acquisitions and the
company's plans to bring down costs.
Drugstore operator Rite Aid Corp reports third-quarter results on Thursday. Rite Aid in October
agreed to be acquired by Walgreens Boots Alliance (O:WBA) for $9.4 billion, combining two of the three
biggest U.S. drugstore operators. Rite Aid in September cut its full-year forecasts for total
earnings and drugstore sales, citing lower pharmacy reimbursements and expenses related to its
$2 billion-acquisition of pharmacy benefit manager EnvisionRx. Analysts will be looking for
updates on the deal, which is likely to face tough antitrust scrutiny, and comments on pressure
from low pharmacy reimbursement rates as generic drug prices go up.
Olive Garden restaurant chain owner Darden Restaurants Inc (N:DRI) is expected to report second-quarter
profit and sales in line with analysts' estimates on Friday, according to Thomson Reuters
StarMine. Investors will be looking out for any changes in the company's full-year
same-restaurant sales and profit forecasts, which could be impacted by higher food prices.
Drugmaker Valeant Pharmaceuticals International Inc (N:VRX) will host an Investor Day on Wednesday,
where the company will make highly anticipated revisions to its financial guidance in the wake
of ending its relationship with specialty pharmacy Philidor. Severing those ties is expected to
cut into dermatology revenues, the company has said. The forecast will give traders fundamental
ideas to trade in a stock that has swung wildly on fears about new concerns arising from its
business practices.
Sweden's central bank announces rate decision on Tuesday. The Riksbank has slashed rates to
record low -0.35 percent and announced an extensive QE-program in order to push up the inflation
against their 2 percent target. And for a while, it seemed that prices were rising steadily.
Together with rising inflation expectations, a growth rate of almost 4 percent during the third
quarter, the ECB underwhelming the market and the Swedish crown actually weaker after the ECB
than before - forecasts for further easing by the Riksbank look wide of the mark. But, a
negative surprise in November inflation could however change the central bank's mind.
On Tuesday, the Bank of Canada releases the semi-annual Financial System Review, which deals
with the main risks to financial stability. This issue will also feature the reports Residential
Mortgage Securitization in Canada: A Review and Indebted Households and Potential
Vulnerabilities for the Canadian Financial System: A Microdata Analysis. Bank of Canada Governor
Stephen Poloz and Senior Deputy Governor Carolyn Wilkins will hold a news conference after the
release.
Canada's annual inflation rate is likely to have increased by 1.5 percent in November on Friday,
compared to previous month's reading of 1.0 percent. Wholesale trade is expected to have
rebounded by 0.1 percent in October, after it unexpectedly fell by 0.1 percent in September.
Meanwhile, data on manufacturing sales is due to be released on Tuesday.
Mexico's central bank is expected to hike interest rates on Thursday off a record low of 3
percent if the U.S. Federal Reserve does so earlier in the week. Aggregate demand data for the
third quarter will be released on Friday. Meanwhile, Chile's central bank meets on Thursday to
decide the benchmark rate. The market is split on whether the bank will raise rates by 25 basis
points to contain inflation or leave easing in place to stimulate the still flagging economy.
Separately, Argentina is due to release November consumer inflation data on Wednesday.
ON MONDAY, DEC 14
Bank of Japan (BOJ) releases quarterly tankan survey on corporate inflation expectations. This
survey, released a day after the tankan business sentiment survey, is drawing more attention
than in the past because how inflation expectations are shaping up holds the key to the success
of the BOJ's massive stimulus program. The previous survey in September showed a slight decline
in corporate inflation expectations, casting doubt on the BOJ's argument that its aggressive
money printing is spurring expectations that inflation will accelerate ahead, and hopefully
encourage companies to boost capital expenditure now rather than sit on their huge cash piles.
Brazil's central bank releases results of a weekly economic survey with more than 100 financial
institutions. This will include forecasts for GDP, interest rates and inflation rates.
LIVECHAT - FED FOCUS with economist Robert Brusca and GLOBAL FLOWS with Lipper
Veteran Wall Street economist Robert Brusca brings to the forum his reading of the Federal
Reserve just two days before the central bank is expected to raise rates for the first time in
nearly a decade. (1000/1500) Separately, Lipper analysts from America and Europe take questions
from traders, portfolio managers and Reuters journalists on what changing flows say about asset
allocations, hot and cold sectors and the varying appeals of regions and industries. (1030/1530)
To join the Global Markets Forum, click here