As earnings season winds down, investors around the globe are left to consider how a shifting macro environment will impact different asset classes and geographies. This past week’s iteration was the recent currency moves by the People’s Bank of China, which sparked fears that a significant yuan devaluation may have begun. This concern will factor into perceptions of nearly all the major data points that will emerge in the week ahead, from the U.S. Treasury International capital flows, to the earnings of the world’s largest retailer and even unemployment in Brazil where weaker commodity prices are wreaking havoc with government policy. Despite dark clouds on the horizon, summer in the Northern Hemisphere — and its requisite festivals — heads into the home stretch, including a mystical celebration, complete with bejeweled elephants.
Monday, August 17: The U.S. Treasury Department releases monthly Treasury International Capital (TIC) flow data for June. Investors across all asset classes will watch for signals that the People’s Bank of China slow but steady liquidation of currency reserves year-to-date remains focused on the U.S. dollar. This past Wednesday, the PBOC sold dollars heavily during the final 15 minutes of trading to reverse the yuan’s rapid decline one day after a surprise devaluation as the central bank moved toward a free-floating currency band mechanism.
Tuesday, August 18: Wal-Mart Stores will release second-quarter results before equity markets open. The Bentonville, Arkansas–based company reported disappointing sales and earnings for the first three months of the year as the positive impact of cheap gasoline had a less impact on profits than the headwinds from the strong U.S. dollar. In February Wal-Mart, the largest private employer in the U.S., announced an increase in minimum hourly wages to $9 in April with a further hike to $10 by early 2016.
Wednesday, August 19: Japan July trade data is on deck, with consensus forecasts for the annual rate of growth in exports to slip to 5.5 percent versus a prior 9.5. With the yuan making up roughly 30 percent of Japan’s trade-weighted index, further devaluation by the PBOC could disrupt any efforts by the Bank of Japan to weaken the yen to drive external demand and inflation.
Thursday, August 20: The Brazilian Institute of Geography and Statistics releases national July unemployment data. The headline jobless rate in the country jumped from 4.3 percent in January to 6.9 percent in June. The growing number of unemployed comes amid mass protests under President Dilma Rousseff’s government over the Petrobras corruption scandal.
Friday, August 21: Statistics Canada releases July consumer inflation figures for the country. After two rate cuts by the Bank of Canada year-to-date, there is increasing discussion among bond investors that the central bank may be forced to follow the lead of the Federal Reserve and Bank of England and begin a program of quantitative easing to offset the impact of declining oil prices on Canada’s economy.
Saturday, August 22: D.H. Lawrence’s recollection of the Kandy Esala Perahera in Sri Lanka was of a “perpetual fire-laughing motion among the slow shuffle of elephants.” Running from August 20 to 30, the festival marks the anniversary of the theft of one of the Buddha’s teeth from his funeral pyre, which found its way to the Dalada Maligawa, or Temple of the Tooth, on the island nation. The celebrations commence on Saturday with the ceremonial cutting and replanting of a jackfruit tree before the kickoff of the perfumed parade of elephants, fire-eaters and other entertainment.
