(August 4) – Economists who believe North American interest rates are on hold until after the U.S. election in November will spend the coming week looking for signs they may be wrong.
The consensus view is that the U.S. Federal Reserve Board doesn’t have the evidence it needs to raise rates at its meeting this month. Since the following meeting is not until October, and raising rates during an election campaign is avoided at almost all costs, economists say rates are now on hold unless there’s some compelling data in the meantime that shows strong signs of inflation.
There’s little data out in Canada next week, and nothing that’s going to convince the Bank of Canada of anything. Monday is a holiday. The central bank’s quarterly review is due Wednesday, as is housing start data that is not expected to hold any surprises.
In the U.S., markets will hear from Fed chair Alan Greenspan on Thursday. Tuesday will bring the second-quarter productivity report. The Beige Book is out Wednesday, and Friday brings the Producer Price Index. CIBC World Markets says, “A tame core-PPI will build expectations for a similar outcome on core consumer prices.” BMO Nesbitt Burns is looking for a tame result too.
One wildcard in the weeks ahead, according to RBC Dominion Securities, is the political situation in Canada. It suggests Canada could get an election call, and there’s also the possibility that Finance Minister Paul Martin could step down, although October looks more likely for any departure than August.
On the earnings front, Dow Jones industrial average component Wal-Mart reports next week, along with a bunch of other retailers. Home Depot and Hewlett-Packard are the only Dow components left to report the following week. On Tuesday, NASDAQ bechmark Cisco Systems reports earnings and on Wednesday Applied Materials reports, an event that will be key for semiconductors.
In Canada, insurers Kingsway and Fairfax report Tuesday, along with Renaissance Energy. Several other energy plays report Wednesday, while Montrusco and Thomson report Thursday.
-IE Staff