Market eyes globally remain glued on the FOMC meeting held inside the U.S.
This last FOMC meeting in 2015 wraps Wednesday. Following on its heels, monetary boards in Mexico, Indonesia and Japan are to announce moves.
The Fed says its rate decisions stay macro data-dependent. In turn, strong job numbers of late comforted observers. A 25 basis-point “normalization” hike is still expected.
Consensus sees 2 to 4 more hikes in 2016. That forecast could head towards 2 and away from 4 in 2016. Global clouds carrying lackluster GDP growth remain on display.
The Fed chair has almost pre-committed to this week’s rate hike. The rest do appear more data-dependent.
A credit spreads blowout in the High Yield bond sector, originating from a collapsing WTI oil price, is ‘new’ news for the FOMC. What about $20 a barrel in WTI oil? It is not out of the question next year. Will the latest FOMC minutes acknowledge this? That would be something to watch for.
For U.S. stocks to investigate this week, Strong Buy signals have popped up in the large cap U.S. health care sector.
Take a look at the United Health Group (UNH) and Cardinal Health (CAH). Both reached Zacks Rank #1 (Strong Buy) in the last few days. United Health Group has a B in Zacks Value while Cardinal Health has an A.
A third large cap U.S. health sector company Baxalta (BXLT) remains a Zacks #1 Rank. This company is caught up in merger talks with Shire PLC (SHPG).
If you are not interested in beaten-down large-cap U.S. Health Care stocks or their rampant merger activity, look at the consumer retailer American Eagle Outfitters (AEO).
This $3 billion in market cap retailer has a Zacks Rank #1, and has A’s in Zacks Value, Growth and Momentum. You can’t beat that.
Here Is the Week Ahead for Macro Fundamentals:
On Monday, Japan’s final industrial production numbers came out. They showed a -1.4% y/y decline, in line with the earlier number.
Eurozone industrial production looks to rise +1.2% y/y, up from a prior +1.7% y/y number.
On Tuesday, the Eurozone ZEW economic sentiment indicator looks to be firmer at 31, up from a prior 28.3.
The German ZEW current conditions index should be 54.1, down slightly from a prior 54.4 reading. The German ZEW economic sentiment index should be 15, up strongly from a prior 10.5.
The U.S. CPI (ex-food & energy) looks to be +0.2% m/m, a number that doesn’t challenge the Fed’s target level.
The U.S. NAHB builders survey should be solid at 63, up from a prior 62.
South Korea’s unemployment rate stay low at 3.5%.
On Wednesday, the preliminary German Manufacturing PMI should be 52.5, down slightly from a prior 52.9, but still expansionary. The German Services PMI should be 55.5, in line with a strong prior 55.6.
For the Eurozone, the preliminary composite PMI should remain at 54.2. The preliminary Eurozone manufacturing PMI should be 52.2, down from a prior 52.8. The preliminary Eurozone services PMI should be 54, down from a prior 54.2. The cooling of this expansionary trend is not welcome data.
The U.K.’s ILO unemployment rate is 5.3%.
The Eurozone’s HICP core inflation rate should be +0.9% y/y.
Brazil’s broad retail sales numbers should crash -14.7% y/y, worse than a -11.5% y/y print prior.
U.S. building permits should be fine at 1153K, in line with a prior 1150K number. Housing starts should be 1140K, in line with a prior 1060K number.
U.S. capacity utilization should be 77.5%, in line with the earlier reading.
We have all eyes on the end of the two-day FOMC meeting.
On Thursday, the IFO business climate in Germany should be solid at 108.9, the current conditions solid at 113.4, and expectations solid at 104.8. All are solidly optimistic, running well above 100.
The U.K.’s retail sales (ex-auto and fuel) should fall back to +2.2% y/y, from a +3% prior number.
Brazil’s unemployment rate should rise to 8.1% from 7.9%.
U.S. initial claims should be 270K.
EU leaders hold a 2-day summit in Brussels.
There are Bank of Mexico and Bank Indonesia monetary policy decisions.
On Friday, there is a BOJ policy statement and press conference with Gov. Kuroda in Japan.
Brazil’s proxy GDP should be -6.2% y/y.
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