While the crashing price of oil continues to dominate the news, the strong compression in yields on long-term U.S. Treasuries is perhaps a truer signal that consensus on macroeconomic risk factors is shifting. With a global flight to safety lifting the U.S. dollar and debt securities simultaneously, the Federal Open Market Committee announcement on Wednesday presents the biggest potential story of the coming week. According to Derek Holt, an economist at Scotiabank in Toronto, “The reference to how it will take a ‘considerable time’ following the conclusion of asset purchases back in October before the Fed starts raising interest rates will probably disappear from this statement.” An admission by the Fed that a rate change is inevitable may not elicit a strong emotional response in the bond markets, however. A grim picture in other parts of the global economy just might make the U.S. appear attractive in comparison — even despite a central bank preparing to reverse the course of rate direction.
Monday, December 15: Asia analysts will keep their eyes peeled for the results of Japan’s special election, held on Sunday. Based on voter polls, Japanese Prime Minister Shinzo Abe’s Liberal Democratic Party is expected to win by a wide margin. In the U.S., industrial production data for November is forecast to rebound from a month-over-month contraction in October, with capacity utilization also expected to rise. in Recent yield compression in Treasury markets will draw attention Treasury International Capital flows, due to be published by the Fed on Monday.
Tuesday, December 16: Purchasing manager index (PMI) levels in China and Europe alike will be scrutinized for clues to potential central bank actions on Tuesday. HSBC initial December manufacturing PMI for China will be a major focus for investors in the wake of last week’s disappointing November production data. To date, targeted liquidity actions by the People’s Bank of China (PBOC) have failed to stem the pace of slowing industrial activity. In Europe, with manufacturing data slated for release for the primary euro zone economies, market narratives are likely to focus once again on the likelihood of action in the European Central Bank’s next announcement. The Office of National Statistics in the U.K. will release both consumer and producer price inflation levels, with forecasts for no significant change for the month as Bank of England governor Mark Carney continues to hold rates at historically low levels. Separately, the Bank of England will publish its biannual Financial Stability Report. Rounding out the day’s macro releases in Europe are October euro zone trade data and ZEW sentiment index levels in Germany. Darden Restaurants will announce fiscal 2015 second-quarter results on Tuesday before the open of New York markets. This will be the first announcement since Jeff Smith-controlled activist hedge fund Starboard Value secured control of the casual dining company’s board.
Wednesday, December 17: November Japanese trade data will lend insight into the ongoing impact of easing measures by the Bank of Japan. Exports are forecast to slow on a year-over-year basis for the month despite a weaker yen. In the U.K., macro releases for the day include October unemployment data and minutes from the Bank of England’s most recent Monetary Policy Committee meeting. November consumer price inflation for the 18-nation euro zone region is forecast to contract on a monthly basis, adding greater pressure on the ECB to take action. Consumer price measures will also be released in the U.S., with inflation expected to remain in check. Peripheral Europe analysts will be watching the results of the snap election held in economically beleaguered Greece. Over in the U.S., the release of the Federal Reserve monetary policy statement and economic projections is predicted not to show any surprises in guidance. Analysts looking to take the temperature on the 2014 holiday shopping season will be watching for FedEx Corp.’s quarterly results. Also reporting quarterly earnings will be Oracle; consensus forecasts call for a muted fiscal 2015 first-quarter release from the technology giant.
Thursday, December 18: In China, November housing price index levels will be closely watched for any sign that the PBOC’s targeted-liquidity measures are seeping back into property markets. German IFO sentiment indexes and November retail sales data for the U.K. will be the day’s primary economic releases in Europe. U.S. weekly initial jobless claims data will likely take a backseat to oil markets in market narratives, as the American Petroleum Institute’s monthly report addresses supply-side issues for the commodity.
Friday, December 19: The week will end with a relatively light day for economic releases. On Friday the Bank of Japan will release its monetary policy statement, with no forecast for a shift in stance. GfK consumer sentiment and November producer prices for Germany will be a window into the health of the EU’s largest economy.
