Daily Agenda: The Week Ahead, August 22 – 26, 2016

Canadian bank earnings season commences; euro zone PMI data on deck; Jackson Hole symposium brings purveyors of low-interest rates up into the mountains.


Daniel Acker

Monday, August 22: Preliminary purchasing manager index data from market for the primary euro zone economies will be released. As Brexit jitters subside, consensus forecast suggests a modest pace of expansion to continue in the region, aided by European Central Bank stimulus. Manufacturing activity in two economies which have showed signals of stumbling in recent quarters, France and Italy, will be a particular focus for traders speculating that further weakness could spur action from ECB president Mario Draghi and his colleagues.

Tuesday, August 23: Bank of Montreal announces second-quarter financial results on Tuesday, one day ahead of Royal Bank of Canada.

Despite being perceived as global stalwarts of the sector with strong balance sheets, there is gloom among many investors as earnings season kicks off for the four major Canadian banks, which control 85 percent of the nation’s market. The declining fortunes of commodity producers has weighed heavily on lenders north of the border, coupled with concerns over rising household debt linked to rapidly rising housing prices in recent years.

Wednesday, August 24: The National Association of Realtors releases existing home sales data for July. Home builder sentiment picked up recently according to the latest release by the National Association of Home Builders last week, suggesting that improving labor situation and mortgage rates that remain near historic lows continue to propel strength in the U.S. home market. Strong second-quarter results reported by home improvement retailer Home Depot this past week suggested that U.S. home owners have few concerns over the direction of values.

Thursday, August 25: The 2016 Jackson Hole Summit, hosted by the Kansas City Federal Reserve Bank every year since 1978, brings policymakers, academics and bankers from around the globe to gather in the Wyoming ski resort town. Federal Reserve chair Janet Yellen’s speech on Friday is the likely highlight of the event for most investors, as markets look for any whisper of clues as to potential September FOMC monetary policy moves. After the hawkish tone of notes from the policymakers’ July meeting, derivatives markets are increasingly pricing in a rate hike before year-end.

Friday, August 26: The Bureau of Economic Analysis, part of the U.S. Commerce Department, releases revised second-quarter U.S. GDP data. Initial data released in July indicated that the U.S. economy expanded at a weaker-than-forecast 1.2 percent annualized rate during the second quarter. Following soft growth in the first three months of the year, any upward revision will be carefully parsed by Fed watchers speculating on when the next rate hike will occur. Despite being downbeat overall, one silver lining in the initial GDP release was the resilience of the U.S. consumer, with household spending growing at an annual rate of 4.2 percent.