The S&P 500 concluded a third consecutive losing week Friday as investors reacted to a series of macro uncertainties, as well as a dramatic sell-off in oil markets. Yet neither equity volatility nor precious metals rose significantly enough to suggest that the pressure was anything more than the resignation, reflected in orderly selling. The monthly Federal Reserve announcement and the continuing back-and-forth between the Eurogroup and Greece are the primary focus of risk narratives for the week ahead, with expectations for the confluence of the two to support U.S. dollar strength at the euro’s expense. With most forecasters now calling for tightening in June for U.S. benchmark rates and an extended period of easing by European Central Bank, the prospect of the euro reaching dollar parity within the coming months is palpable. Concerns over growth prospects in China are casting a shadow over broad commodity markets and emerging-markets bonds. Going into the new week malaise appears to be the order of the day as investors contemplate a postzero interest rate policy world.
Monday, March 16: Normally not considered a major release, market watchers will be poring through the German central bank’s Buba Monthly Report for any potential insight into Germany policymakers’ view of the Greek debt situation. The macro data release schedule in the U.S. includes February industrial production data. Consensus forecasts call for a marginal slump in activity. Separately, the Federal Reserve is publishing January Treasury International Capital (TIC) data.
Tuesday, March 17: The monthly Bank of Japan monetary policy statement and accompanying press conference will be an opportunity for Bank governor Haruhiko Kuroda to address concerns over whether the bank’s easing campaign is making headway against deflation. In Europe, the big economic announcements are Eurostat’s release of February consumer inflation index levels for the common currency region and ZEW economic sentiment figures for Germany. Equities investors with an eye on Silicon Valley will be watching the fiscal third-quarter earnings announcement from technology stalwart Oracle, especially following news this past week that CEO Larry Ellison’s annual compensation exceeds $100 million.
Wednesday, March 18: February trade data in Japan is expected to show more signals of improving external demand driven by a weak yen, while imports remain subdued on low oil costs. In China, the National Bureau of Statistics will release February housing price index levels. Recent mortgage and credit policy shifts have been implemented by the People’s Bank of China, as Beijing attempts to create a soft landing for inflated property markets. In the U.K., the release of the notes from the Bank of England Monetary Policy Committee’s most recent meeting takes the macro spotlight in Europe for the day. The event perhaps most likely to rattle market sentiment during the coming week, however, is the U.S. Federal Open Market Committee’s rate decision. With consensus forecasts now calling for the Federal Reserve to raise rates in June, any shift in language has potential to drive market volatility.
Thursday, March 19: With concern still high over the pace of growth in China as the country slowly moves away from fixed investment towards domestic consumption, the earnings announcement by China Steel will set the tone for industrials in the nation. The European Central Bank will release its monthly Economic Bulletin, which will detail policymakers’ analysis of both easing and long-term refinancing operations. The U.S. initial jobless claims report will be a focus for investors watching for more good news after the drop to a three-week low reported March 12. Footwear giant Nike will announce fiscal third-quarter results after equity markets close in New York. Consensus estimates predict earnings of $0.85 per share.
Friday, March 20: Monetary policy meeting notes from the Bank of Japan and a speech by the Reserve Bank of Australia will be the main points of focus for Asia-Pacific markets. In Germany, producer price index levels for February are expected to remain subdued. Canadian consumer price inflation for February and retail sales for January are scheduled for release with forecasts for no moves that might sway Bank of Canada policy. In a recent report, David Rosenberg, chief economist at Gluskin Sheff in Toronto, noted that the weaker loonie over recent months has had some positive impacts beyond the usual export competitiveness, such as increased tourism from the U.S.
