Despite all the bad news last week, the coming week could provide excuses to rally if the EU can stay calm.
Debt Crisis Developments
Further developments on the PIIGS debt crisis and how on earth the Troika will calm markets now that private bond holders are now officially no longer protected from losses.
EU Bank Stress Tests
With EU bank stress test data due to be released next week, the leaks begin, with bankers supposedly angry over their strictness and last minute changes. Banks in Spain, Germany, and Greece may have been selected to fail, to be as the sacrifices for the sake of retaining overall credibility for the tests, while a source per Reuters said 5 Italian lenders have passed. All of the major Irish banks currently in state receivership passed last summer’s tests. These were known to be lax, but markets rallied anyway.
After jobs, arguably the next most important monthly US report is retail sales, as consumer spending accounts for about 70% of US GDP. Granted, with employment getting worse, consumer spending should follow it lower. However, per the latest ICSC and Redbook retail sales reports, consumer spending is on the rise. The International Council of Shopping centres said retail sales rose 6.9 % y/y in the month of June compared to 5.4 % in May. Johnson Redbook also reported a 0.9 % rise in chain store sales. If retail sales rebound next week, it could provide some bearish
Q2 Earnings Season
It officially begins this week. Here are a few key names that will likely garner attention.
Monday: Alcoa (AA) after market close
Wednesday: Yum Brands (YUM), Marriot Hotels (MAR), both after market close.
Thursday: Google (GOOG) JPMorgan-Chase (JPM) before open
Friday: Citibank (C) before open
As noted in Part 1, earnings seasons tend to be bullish events in the sense that they tend to provide at least a short term boost for stocks, regardless of the underlying reality.
Other Calendar Events
Big Theme: Slew of China Data
China will see a slew of data in the week ahead which includes the June trade balance, industrial production, retail sales, CPI, and most importantly 2Q GDP figures.
- CNY: trade balance
- EUR: Trichet Speaks
- AUD: home loans m/m
- JPY: BoE rate statement & press conference
- EU: ECOFIN Meetings
- GBP: CPI y/y
- USD: Trade Balance, FOMC Meeting Minutes
- CNY: GDP q/y, fixed asset investment ytd/y, industrial production/y, NBS press conference, new loans, retail sales y/y
- GBP: first time jobless claimant count
- USD: Fed Chairman Bernanke testifies to Congress
- NZD: GDP
- USD: retail sales, PPI
- USD: CPI m/m, Empire State Manufacturing index, Preliminary UoM consumer confidence
- EUR: Bank stress tests results
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