Economic week ahead: Apple, Facebook and Europe
- New chief must revive Yahoo's yodel
- Barclays: A bad deal for Absa
- South African Reserve Bank cuts repo rate to 5%
It's another busy week for corporate earnings. Tech titans Apple and Facebook, scandalised banking giant Barclays and a host of other big name companies will provide trading updates in the week ahead.
In the background, global markets will continue to keep a sceptical eye on developments in Europe. Germany's Der Spiegel magazine reported on Sunday that the International Monetary Fund (IMF) plans to stop further rescue payments to deeply indebted Greece, making insolvency by September a growing possibility for the country. Representatives from the IMF, European Union and European Central Bank will travel to Athens for talks on Tuesday.
Here is your guide to these and other events likely to move markets in the week ahead.
The first significant data release on America's economic calendar this week will come on Tuesday when Markit Economics releases its flash purchasing index (PMI) for July. Analysts surveyed by Bloomberg expect the index to drop slightly.
On Wednesday, Economists surveyed by Dow Jones expect last month's new home sales data to show a 1.6% gain following a robust 7.6% increase in May. Pending home sales, which will follow on Thursday, are seen rising 0.9%, down from a 5.9% uptick in the previous month.
Also on Thursday, analysts expect weekly claims for new jobless benefits – which surged unexpectedly by 34 000 in the week of July 14 – to drop by 6 000 to 380 000. Last month's durable goods orders figures – a measure of how busy factories will be over coming months – are expected to post a 0.6% gain, down from a 1.3% rise in May.
Finally, on Friday, government will release second quarter gross domestic product (GDP) figures. Markets expect the data to show the world's largest economy grew by a mere 1.2% in the April to June period.
Beyond economic data, this a big week for corporate earnings reports in the United States. Over 100 companies will report results this week, including Apple, Facebook and dozens of other household names.
Apple is expected to post double-digit earnings and revenue growth on Tuesday. Analysts surveyed by Thomson Reuters expect Facebook's first earnings report since publicly listing to show earnings of 12 cents per share and revenue of $1.15-billion.
Purchasing managers' index (PMI) readings from Germany and France – the continent's two largest economies, respectively – and for the eurozone as a whole are the big items on Europe's economic calendar this week. Releases covering the manufacturing and services sectors are scheduled for release on Tuesday.
Markets expect the euro zone's manufacturing PMI – a forward looking measure of economic activity – to slide further below the 50.0 mark separating expansion from contraction, likely falling from a reading of 45.1 in June to 44.4 in July. The PMI for the currency bloc's services sector is expected to fall from 47.1 to 46.7 over the same period. Germany and France – are also forecast to show further slippage.
Elsewhere on the calendar, the Ifo Institute's closely followed gauge of the German economy's likely performance over the next six months is widely expected to show further deterioration and the United Kingdom's gross domestic product (GDP) figures are likely to show that the country's economy continued to struggle in the second quarter. Both releases are scheduled for Wednesday.
Economists expect to see a 0.2% decline in the UK's GDP. If the consensus forecast proves accurate, Wednesday's data will mark the third consecutive quarter of economic contraction for Europe's third largest economy.
On the corporate earnings calendar, over 100 major companies will provide trading updates this week. Markets are likely to focus their attention on Europe's troubled banks. Highlights include first half results from Lloyd's Banking Group on Wednesday and Barclays – the scandal-ridden bank – on Friday.
Data from China and Japan – the world's second and third largest economies, respectively – will dominate Asia's economic calendar this week.
On Tuesday, the Conference Board will release its leading indicator for China – a composite measure of future economic conditions – and HSBC will release flash purchasing managers' index (PMI) results. This forward looking measure of activity remained in contraction territory for the eighth straight month in June, but is expected to rebound slightly in July.
On Wednesday, Japan's Ministry of Finance will release June's trade data. Analysts surveyed by Market News International expect the figures to show a trade deficit of ¥113.2-billion, following deficits of ¥910.4-billion in May and ¥522.0-billion in April.
Exports are seen falling 3.0%, year on year, their first decrease in four months. Import figures are forecast to show a 0.2% decline, year on year, their first drop in 30-months.
On Friday, Japan's Ministry of Internal Affairs and Communications will release June's core consumer price index (CPI) – a measure of price changes excluding volatile food and energy prices – and the country's ministry of economy, trade and industry will release last month's retail sales figures.
Analysts expected the core CPI, which fell 0.1% in May, to remain unchanged in June. The Bank of Japan is forecasting a 0.2% rise for the 2012 fiscal year as a whole. Markets are expecting a 1.4% rise, year on year, in retail sales. If the forecast proves accurate, June would mark the seventh straight month in which Japan's retail sales have increased.
Markets will be keeping a close eye out for results from Brazilian banks this week. Analysts fear that earnings at the country's largest institutions suffered in the April to June quarter as the continent's largest economy slowed. Record low interest rates and government pressure to lower borrowing costs likely walloped the sector.
On Monday, Banco Bradesco – Brazil's second largest bank – will report second quarter earnings. Analysts surveyed by Reuters expect to see a 2.7% quarter on quarter rise in recurring profit, a measure of profit which excludes once-off income. The bank's return on equity (ROE) – a broadly used measure of bank profitability – likely fell to 20.0% in the second quarter from 21.4% in the first.
On Tuesday, Itaú Unibanco's is likely to report that its recurring profit fell 1.2% over the same period but that ROE rose from 19.3% during the first three months of the year to 19.5% in the second quarter, still low relative to the bank's historical performance.
On Thursday, Santander Brasil is expected to report that net profit – a measure of profitability that includes once-offs – fell 27.2%, quarter on quarter. Recurring profit at Banco do Brasil is forecast to drop 14.3%, quarter on quarter.
This is a light data week in South Africa, the continent's largest economy. Statistics South Africa will release tourism accommodation, transport and food and beverage sales figures for May on Monday along with June's liquidations data. Producer price index (PPI) data – a measure of price rises at the factory gate – will follow on Tuesday.
Also on Tuesday, South Africa will auction R2.1-billion of government bonds maturing in 2023 and 2041. Yields on South Africa's 2015 and 2021 bond dropped to record lows of 5.32% and 6.43%, respectively, on Friday following a surprise interest rate cut on Thursday. If yields on longer-term bonds also start to fall, it will signal to economists that markets are pricing in further rate cuts later this year.
Elsewhere on the continent, Nigeria's central bank will announce its latest interest rates decision on Tuesday. Markets expect policymakers to leave rates on hold, at 12.0%, for the fifth time in a row. Zambia will auction 300-billion kwacha of short-term debt on Thursday.
On the corporate calendar, Amplats and Ellies Holdings will release results on Monday. ArcelorMittal and AECI will follow on Wednesday. On Thursday, Investec will release an interim management statement. Finally, Absa will release interim results on Friday.
Matt Quigley writes the weekly economic preview for the Mail & Guardian. His blog on the South African economy can be found at thoughtleader.co.za/mattquigley.