Daily Agenda: The Week Ahead, February 2 – 6, 2015

Investors ponder a new currency war; quarterly earnings reports continue; U.S. monthly unemployment report on deck.


Carlos Javier Sanchez

For many global investors the month of January felt like a death of a thousand cuts — rate cuts to be precise. Counting the Bank of Russia yesterday, over the span of 30 days, 12 central banks worldwide lowered benchmark lending levels. Eight of these banks were in emerging markets battered by forces beyond their control. Among the developed economies whose central banks slashed lending costs there was a similar theme: nations such as Denmark, Canada and Australia are wealthy, but also hostage to larger economies that they depend on for trade. Factor in the Swiss National Bank’s abandonment of its ceiling on the euro, and January looks very much like the supposed currency war that many analysts and pundits predicted soon after the 2008–’09 financial crisis. For investors seeking shelter, February may not provide respite. Société Générale strategist Kenneth Broux put it succinctly in a report for clients released yesterday: “The unpredictability of central banks and fears that negotiations between the new government in Greece and the Troika will hit a brick wall mean that February is unlikely to bring a quieter interlude.”

Monday, February 2: Final January HSBC manufacturing purchasing manager data for China is scheduled for release. With flash readings that are indicating a third consecutive contraction, any surprise improvement will be likely to lift near-term sentiment in commodities markets. Markit manufacturing purchasing managers’ index (PMI) data for January will be released for the euro zone and its primary economies, with forecasts for a slowdown in industrial activity. In the U.S., December personal consumption expenditure data is expected to indicate a slowdown in household spending while ISM manufacturing is forecast to remain flat for the month of January. With low oil prices weighing heavily on energy-sector stocks, the fourth-quarter earnings announcement by ExxonMobil on Monday morning will be a focus for investors.

Tuesday, February 3: In light of Bank of Japan governor Haruhiko Kuroda’s statements this past week in support of staying the quantitative easing course, the monetary base release by Japan’s central bank is likely to hold few surprises. The current rate of expansion is expected to hover near 40 percent year-over-year. In Europe, December producer price index data will be less relevant to market sentiment, with European Central Bank action now a fait accompli. Factory orders for December will be released in the U.S., but the bigger announcement for the day may prove to be Autodata vehicle sales for January, expected to remain steady at an annual pace of roughly 17 million. Chicago–headquartered agricultural processing company Archer Daniels Midland is among the major corporate earnings announcements for the day.

Wednesday, February 4: A week full of PMI data continues, with HSBC services PMI data in China to be followed by several Markit nonmanufacturing releases in Europe. Also to be announced are Euro zone retail sales figures for December, with expectations for figures to show a sluggish holiday shopping season. In the U.S., January Institute for Supply Management nonmanufacturing PMI and Mortgage Bankers Association mortgage applications are among the primary economic data releases of the day. Commodities investors will parse through weekly Energy Information Administration crude oil storage data. Quarterly earnings reporting season continues to plow on. Corporations posting results include GlaxoSmithKline, Prudential Financial and General Motors, as well as boutique investment bank Evercore Partners, which was recently hired by Mikhail Prokhorov to sell the Brooklyn Nets basketball team.

Thursday, February 5: German factory orders for December are expected to show a rebound from a prior contraction, as the European Union’s largest economy attempts to find its feet. After a sudden decline last week, U.S. initial jobless claims are expected to rebound modestly, as long-term labor market trends continue to improve. In a day full of earnings releases by major companies, the financial services sector will be a focus as Lazard, BNP Paribas and private equity fund manager Apollo Global Management, presently embroiled in the Caesars Entertainment bankruptcy, are posting results.

Friday, February 6: December industrial production data from Germany and trade data for France and the U.K. will be released as investors look for clues to whether the stagnation in Europe is reaching its inflection point. The Department of Labor January employment situation report will be released in the U.S. on Friday, with expectations for a moderation in payrolls after last month’s strong showing and an unchanged headline unemployment rate. Later in the day, the Federal Reserve is posting consumer credit estimates for December. Consensus forecasts are for a $15 billion rise, with nonrevolving debt expected to lead the charge once again.