Daily Agenda: The Week Ahead, August 1 – 5, 2016

Chinese PMI in focus as PBOC considers further stimulus; the Olympics kick off in the midst of political scandal in Brazil


Dado Galdieri

Monday, August 1: With concern over slowing demand in China remaining a primary concern for the global economy, final July purchasing manager index data will be in the investor sentiment spotlight. Both the government National Bureau of Statistics and private Caixin/Markit figures for the manufacturing sector are expected to show that export-centric factory operators struggled during the month after a rebound with three consecutive expansionary months between March and May. This past week, Moody’s Investors Service warned that the full extent of the shadow lending system in China may not be fully understood and that private sector indebtedness may be more significant than official statistics suggest. According to the ratings agency, the total understatement of outstanding debt may be at least 23 percent of current GDP by year’s end.

Tuesday, August 2: Luxury automaker Ferrari, which trades on Nasdaq under the ticker RACE, reports second-quarter earnings. Since the company’s IPO last fall after its split from Fiat Chrysler Automobiles, it’s had to contend with declining global demand for luxury products by defending margins for their coveted automobiles. Despite macro concerns in primary Chinese and European markets, analysts remain positive after a nearly 9 percent year-over-year increase in revenues during first-quarter 2016. In what the team calls a “joint decision,” technical director James Allison stepped down from Ferrari’s Formula 1 team this past Wednesday in what’s been a winless season so far, marred further by the untimely death of his wife from bacterial meningitis in March.

Wednesday, August 3: The U.S. Energy Information Administration releases its weekly oil inventory report. The reading this past week showed a rise of nearly 1.7 million barrels, versus the decline of 2 million anticipated by consensus forecasts causing West Texas grade crude futures to sell off by 2 percent. With the oil rally that began earlier this year stalling out and grim earnings guidance from major international producers such as BP and Statoil, markets will be focused on any signal that U.S. producers are keeping the pumps running. Among other factors driving the slump are reports of increasing gasoline stockpiles as refineries continue to work through cheap oil purchased earlier.

Thursday, August 4: The Bank of England monetary policy statement will be closely watched by investors waiting for any indication that Bank governor Mark Carney and his colleagues are concerned about any further Brexit fallout. The July 27 GDP release from the Office for National Statistics confirmed that the U.K. economy expanded by 0.6 percent, a faster rate than anticipated, up from 0.4 percent during the first three months of the year. Newly installed Chancellor of the Exchequer Philip Hammond took the opportunity to proclaim the U.K.’s economic fundamentals as strong and downplay concerns over the country’s imminent departure from the EU.

Friday, August 5: With more than 1 billion viewers expected to watch this year’s summer Olympics in Rio de Janeiro, the opening ceremonies will be a chance for Brazil to grab some positive headlines. With concerns ranging from protests by police and security forces, pollution, the Zika virus and even the design of the national team’s uniforms, at least some controversy is to be expected. Both impeached President Dilma Rousseff and indicted former President Lula da Silva have announced that they will boycott the ceremony as the political scandal involving Petrobras continues to drag in more elected officials. The identity of the final relay runner who will light the torch remains a closely guarded secret.