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Week Ahead: Corporate Earnings, Treasury Yields, and Central Banks to Dominate
Posted On 05 Feb 2018
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Who would have predicted what happened on Friday? After a major bull run that started after the financial crisis, investors shifted their focus from stocks to treasuries. This led to a bloodshed in the stocks market.
On Friday, the Bureau of Labor Statistics (BLS) released its monthly jobs numbers that passed analysts’ expectations. The economy created more than 200K jobs while wage grew to the fastest rate in 9 years. This led to the increased treasury yields, which moved to the highest level in three years. At the end of the day, the Dow tanked by 666 points.
This week, traders will focus on central banks, politics, and earnings. On Tuesday, the MPC of the Reserve Bank of Australia (RBA) will announce the monetary policy decision. This data will be released at 4:30 AM (GMT) during the Asian session. Traders will look out for the headline number, which they expect to remain unchanged at 1.50%. They will also pay close attention to the statement, which will accompany their decision. This statement will give them the direction, which the bank expects to take.
The data will come an hour after the country releases the monthly retail sales. This number will however not be very important because the attention among traders will be to the monetary decision.
On Wednesday, we will receive the monetary decision from the Reserve Bank of New Zealand. This data will come after we receive the QoQ employment change and after the country celebrates the Wichita day. Traders expect the RBNZ to leave interest rates unchanged at 1.75%. On the same day, the Emerging Markets watchers will receive the interest rates decision from India.
On Thursday, the BoE will complete its monetary policy meeting. At 1PM GMT, the committee will release its interest rate decision. At the same time, Governor Carney will release his letter on December inflation, which rose by 3.1%, which is up than the 2% target. In January, the inflation rate grew by another 3%. In addition, traders will focus on the policy statement, which will give them direction the BoE will take this year.
In the EU and the United States, it will be a quiet week with no major economic data expected. In Canada, traders will wait for the PMI and the employment data. The employment data will particularly be important at a time when traders are struggling to read the BoC tealeaves on rate hikes. On Tuesday, we will receive the Ivey PMI data that shows the performance of the Canadian manufacturing. On Friday, we will receive the employment data. Traders expect the country to create 10K jobs and the unemployment rate to slow to 5.8%.
On earnings, it will be a busy week for investors. This week, we expect earnings from large companies like BNP Paribas, General Motors, Chipotle Mexican Grill, and Disney. As we have seen in previous weeks, traders will not focus on the current earnings. Instead, they will focus on the guidance of the next quarter and the full year. They will also focus on the windfall they will receive regarding to the change in taxation.
Sources:
https://www.npr.org/sections/thetwo-way/2018/02/02/582809604/dow-plummets-more-550-points
https://nypost.com/2018/02/02/dow-plunges-550-points-in-biggest-one-day-drop-since-2016/
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