Greece is likely to continue to dominate headlines on Monday. But as the week rolls on, central bank meetings in Europe and Asia, data releases in the United States and China and a host of corporate earnings reports are also likely to move markets. Here is your preview.
New jobless benefit claims data, trade statistics, consumer sentiment readings and a series of corporate earnings reports are the dominant items on an otherwise sparse American economic calendar this week.
The first high-profile data release — America’s weekly jobless benefit claims report — is scheduled for Thursday. New benefit filings fell by 12 000 in the week ended January 28, but may have edged up slightly last week. The small rise in new claims forecast by most analysts is likely to be shrugged off by markets.
Last Friday’s monthly jobs report showed that the world’s largest economy added 243 000 jobs in January. This marked the biggest monthly gain in employment since April of last year. The report also showed that the country’s unemployment rate fell to 8.3% in January, a three-year low. It is likely to take more than a slight uptick in benefit claims to undo the optimism created by this news.
Attention will shift to America’s trade picture on Friday as government officials release December’s international trade statistics. America’s trade gap — the amount by which the value of imports exceeded the value of exports — widened significantly in November to $47.8-billion, largely as a result of a surge in oil imports. Analysts expect the gap to have remained unchanged in December.
On the corporate earnings calendar, markets are likely to focus on quarterly financial results from Coca-Cola and Disney on Tuesday. On Wednesday, tech giant Cisco and Visa are likely to hog the spotlight. Thursday will bring Pepsi’s results. With the possible exception of Cisco, none of these reports is likely to move markets significantly.
Greek debt negotiations — aimed at lightening Greece’s debt load to more sustainable levels — and central bank meetings in Frankfurt and London are likely to dominate European business headlines this week.
On Saturday, Greece reportedly finalised a debt restructuring deal with private sector bondholders. This debt swap is a prerequisite for Greece to secure €130-billion in additional aid from the European Union (EU), European Central Bank (ECB) and International Monetary Fund (IMF). Without this aid, Greece could default on its debt in March, sending shockwaves through the global financial system.
On Sunday, however, eurozone finance ministers reportedly told Greek officials that the deal was insufficient until the country’s leaders guaranteed to implement a series of fiscal and labour market reforms. Greek officials appear reluctant to commit to these politically unpopular reforms in the run-up to the country’s April elections.
According to a spokesperson for Passok, Greece’s largest political party, international donors have given Greek leaders a Monday deadline to provide an initial response to their demands.
A formal offer for the debt swap must be made by February 13 to allow all procedures to be completed before €14.5-billion in bond payments come due in March.
Greece is likely to dominate headlines early in the week but, on Thursday, investors will turn their attention to the ECB. Markets broadly expect policymakers to leave rates unchanged. Markets are likely to focus on ECB chief Mario Draghi’s post-meeting press conference for any word on the ECB’s plans for its Greek bond holdings.
The Bank of England’s policymakers will also gather on Thursday. Most analysts expect the central bank to approve another round of quantitative easing — through asset purchases of roughly €50-billion — in an effort to further stimulate Britain’s struggling economy.
A rates decision in Australia, the release of inflation data in China and corporate earnings results from Japan are the highest profile events in Asia this week.
On Monday, the Reserve Bank of Australia (RBA) will meet to consider interest rates. Officials previously enacted cuts of 0.25% in both November and December in the face of mounting fears of a global economic slowdown. Most analysts expect the central bank to lower rates further at this week’s meeting by another 0.25% to 4.00%, their lowest level in almost two years.
On Wednesday, markets will shift their attention to the north as China releases two key inflation measures. Economists expect consumer price index (CPI) data to show that the annual rate of growth in consumer prices fell further in January to 4.0% from 4.1% in December. Analysts also expect the country’s producer price index (PPI) to fall from a 1.7% growth in December to 0.8% in January.
Declines in both of these measures would be welcome news. Although recent data releases have provided some encouraging signs, concerns persist that the world’s second largest economy is slowing. If inflation falls, China would have more room to loosen monetary policy in a bid to stimulate economic growth.
On the corporate earnings calendar, Japanese automotive titans Toyota and Nissan will release quarterly results on Tuesday and Wednesday, respectively. The consensus forecast among analysts surveyed by Thomson Reuters is that Toyota will report a net profit of ¥67.5-billion for the company’s fiscal third quarter, a 28% decline from the same period last year. Nissan is also expected to report a fall in profits from ¥80.1-billion to ¥68.6-billion.
The mining sector is likely to attract South African investors’ attention this week as delegates from across the world gather in Cape Town for the 18th annual Mining Indaba. A long-rumoured mega merger in the industry is likely to dominate conversation.
A merger between commodities trader Glencore and mining company Xstrata may be announced as early as Tuesday. According to a report by Reuters, the two companies are close to finalising the details of an $80-billion deal, the largest ever for the industry.
Many analysts believe that the combined Glencore-Xstrata company would target Anglo American — once South Africa’s largest company — for takeover. Xstrata failed in a bid to merge with Anglo in 2009 but, together with Glencore, could now have the resources necessary to take over the company, now valued at just under $60-billion. Were a takeover to occur, the resulting company would surpass BHP Billiton as the world’s largest mining company by revenue.
Outside of the mining sector, only a few economic statistics are slated for release this week. On Monday, the South African Chamber of Commerce and Industry will release last month’s business confidence index. On Tuesday, Statistics South Africa will release the fourth quarter 2011 labour force survey and, on Thursday, December’s mining and manufacturing data.
Headlines on Friday are likely to focus on President Jacob Zuma’s State of the Nation address, which he will deliver to Parliament on Thursday.
Matt Quigley writes the weekly economic preview for the Mail & Guardian. He is chief executive of an economic research and forecasting firm and previously worked for the U.S. Treasury Department and Federal Reserve Bank of Boston. His blog on the South African economy can be found at www.thoughtleader.co.za/mattquigley.