Daily Agenda: The Week Ahead, October 19 – 25, 2015

Canada and Argentina take to the polls; AmEx and State Street announce earnings; ECB announces rate decision.


Ben Nelms

Voters are taking to the polls this coming week into two national elections with ramifications emblematic of global macroeconomic trends. In Canada, the sting of low oil prices led earlier this year to an upset of the Conservative Party in Alberta, the party’s main base of support and the home stomping grounds of incumbent Prime Minister Stephen Harper. Argentina, where deficit spending and slowing demand from China have precipitated a potential crisis, will also head to the ballot box to choose a new leader to steer against economic headwinds after Cristina Fernández de Kirchner, the current president, steps out of politics. After a series of financial-sector earnings releases brought Wall Street under investors’ microscopes last week, results from American Express and State Street will bring the consumer credit and custodial segments of the financial services sector into focus.

Monday, October 19: An extremely tight national electoral race Canada comes to what may turn out to be a photo finish. Conservative incumbent Prime Minister Stephen Harper has faced a stiff challenge from New Democratic Party leader Tom Mulcair and Liberal star Justin Trudeau. Trudeau, the 43-year-old son of former prime minister Pierre Trudeau, has surged in recent polls, putting his party neck-and-neck with the Tories.

Tuesday, October 20: Despite it being only the world’s 12th-largest economy, the monetary policy of Australia has outsized impact, thanks to its role as a commodities producer and the Reserve Bank of Australia’s history of navigating a balance between inflationary risks and growth targets. The release notes from the most recent RBA meeting will provide insight into the thinking of governor Glenn Stevens and his colleagues on long-term demand signals from the developing world, as well as the potential international impact of Fed easing.

Wednesday, October 21: Credit card giant American Express releases third-quarter earnings. The company’s stock has underperformed financial-sector peers year-to-date. Company management has warned investors that expenses would increase during the second half of the year, as the end is nearing of a crucial partnership with membership club box retailer Costco. In addition to questions regarding the Costco portfolio, management will likely field questions about the company’s ongoing appeal against a successful U.S. Department of Justice suit that, if upheld, will allow merchants to steer customers towards lower-fee rivals such as MasterCard and Visa.

Thursday, October 22: Analysts will be keeping a close watch on the European Central Bank’s monthly interest rate decision after some provocative comments by ECB president Mario Draghi during the press conference after the September meeting and a call for action by bank governing council member Ewald Nowotny this past Wednesday. Draghi indicated that increased quantitative easing may be deployed as global market turmoil and a slowdown among emerging markets has threatened recovery in the common currency zone; Nowotny suggested that more aggressive measures should be considered to combat deflation.

Friday, October 23: Boston–based State Street Corp., the second-oldest financial institution in the U.S., will announce financial results before equity markets open. Consensus analysts’ estimates are for $1.23 in earnings per share for the three months ending in August. The bank’s investment division, State Street Global Advisors, used the launch of the new Financial Services and Real Estate Select Sector SPDR Funds last week to announce a lowering of expense ratios for all of its popular sector SPDR products to 0.14 percent from a prior 0.15, as industry competition continues to drive ETF fee compression.

Sunday, October 25: Argentina holds its first national election in more than a decade without a candidate named Kirchner on the ballot. After failed proposals by members of outgoing president Cristina Fernández de Kirchner’s Front for Victory coalition for a constitutional amendment to lengthen term limits, the faction has been dogged by political infighting. Chief among the topics discussed by candidates of all stripes has been how to steer the nation’s economy back on course. Argentina’s inflation rates are among the world’s highest and in July 2014, the country defaulted for the second time in 12 years when it couldn’t meet sovereign debt interest payments to a group of so-called holdout creditors, led by hedge fund manager Paul Singer’s NML Capital.