Summer has arrived but the news calendar isn’t slowing down at all. There are a number of developments coming over the next fortnight from around the world that could potentially move markets.
Central banks may attract a lot of attention in the coming weeks with a number of key meetings on the schedule. Recent comments from central bankers related to joining the Fed in cutting back stimulus has had a big impact on currency trading lately.
In recent weeks the Bank of Canada has been increasingly signalling the potential for a rate increase on Wednesday the 12th. Governor Poloz and his deputies have made a number of hawkish hints indicating that the emergency stimulus from the two 2015 rate cuts has run its course, that the Canadian economy has adjusted to lower oil prices and that central bankers should not wait for inflation to reach targets before taking a foot off the gas. This plus recent strong Canada data including a second big month of job gains in a row has sparked a big rally in CAD on anticipation of a rate hike this month and likely a second one sometime later. A hike would be widely expected but a decision to hold and hint toward a later hike could send the Loonie back downward.
Between 19 and 20 July, the Bank of Japan and ECB are meeting. Governor Kuroda has been looking like an increasingly lonesome dove, which has dragged JPY lower. Any hint of a hawkish turn could spark a turnaround in the yen. The ECB, on the other hand, has been sending mixed signals lately hinting hawkishly about tapering stimulus but then telling the street not to overact. Traders may look to the Draghi press conference for more clarity.
Earnings season kicks off this week, which could have a big impact on trading in indices. The post-election honeymoon extended the usual seasonal rally through May and into June. An expected seasonal correction only started to materialize in late June and early July.
Because of this, valuations remain stretched and expectations remain extremely high heading into earnings season. Results and guidance may indicate if higher expectations are justified in the current business environment (Nike’s blowout results would suggest yes, at least for some companies). The reaction to news may be significant. While those who disappoint may be punished severely as usual, how the traders react to those who meet or beat the street may be more telling. Are traders willing to step up to reward positive earnings or are they looking to results for a chance to take profits ahead of what could be a dicey and volatile late summer?
Friday 14 July looks to be a big day for bank earnings, but the key early report could be Netflix on Monday 17 July. As one of the FAANG (Facebook, Apple, Amazon, Netflix, Google) stocks where gains were concentrated in recent months, expectations are running particularly high. How the market reacts to Netflix’s results could set the tone for the rest of earnings season.
Coming out of the G20 meeting, the overseas economic spotlight turns to China. A number of key Chinese data announcements are due over the next couple of weeks including trade on 12 July and GDP on 16 July . The impact of China data can spread far beyone its local markets, also influencing commodity prices by providing insights into resource demand. This can then follow through to resource stocks and resource currencies in Canada, the UK, Australia and elsewhere.
Economic/political news (North America time):
Sunday 9 China inflation
Tuesday 11 FOMC Brainard speaking
Wednesday 12 Bank of Canada interest rate (0.25% hike to 0.75% expected)
Bank of Canada Poloz and Wilkins press conference
Bank of Canada Monetary Policy Report
FOMC Yellen testimony to House, George speaking
Fed Beige Book
Wed 12 evening China trade balance
Thursday 13 US producer prices
FOMC Yellen testimony to Senate, Evans speaking
Friday 14 US CPI, retail sales, industrial production, UMich consumer
Sunday 16 China GDP, retail sales, industrial production
Monday 17 US Empire manufacturing
Tuesday 18 UK inflation
Wed 19 evening Bank of Japan meeting (no changes expected)
Thursday 20 ECB meeting (no changes expected)
US Philadelphia Fed
UK retail sales
Friday 21 Canada inflation, retail sales
Sunday Japan flash manufacturing PMI
Friday 14 JPMorgan Chase, Wells Fargo, Citigroup
Monday 17 Netflix
Tuesday 18 Bank of America, Goldman Sachs, IBM
Wednesday 19 Canadian Pacific, Citrix, Qualcomm
Thursday 20 Rogers, Travelers, MicroSoft, Visa
Friday 21   EnCana, Husky Energy, General Electric
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