By MICHAEL BABAD
Monday, January 8, 2018
My mom had a stock phrase that she'd pull out on the last day of every summer and winter break when I was a kid: "Vacation's over, young man."
It drove me nuts then and irks me to this day. But she'd be right this time around, given what's on tap for the next few days compared with last week's immediate postholiday calendar.
We'll get some biggies on the economic and corporate fronts that hold clues to the year ahead for investors still savouring the rally in stocks.
"Equity markets picked up right where they left off, posting strong gains across the board [last] week," Bank of Montreal senior economist Robert Kavcic said.
"No, that thumping sound wasn't bitcoin hitting the floor or iguanas dropping out of trees, it was the bulls getting an early start on 2018. The S&P 500 rose 2.6 per cent, with technology, energy and materials leading, while defensive and rate-sensitive sectors lagged."
MONDAY: SURVEY SAYS ...
The Bank of Canada's business outlook survey should give us a good sense of whether it will raise interest rates at next week's meeting, which is what some economists expect in the wake of Friday's labour report showing 79,000 jobs created in December and unemployment easing to 5.7 per cent.
Indeed, it's the "last critical piece of information" before the central bank's Jan. 17 rate decision, as Mr. Kavcic put it.
Observers believe strong survey results, at 10:30 a.m. ET, will lock in a hike of onequarter of a percentage point to the BoC's benchmark overnight rate, which sits at 1 per cent after two increases last year.
"Indications of sustained growth slightly above potential and indications of modest inflation pressures building would reinforce our view that the Bank of Canada is likely to raise rates in January," said Paul Ferley, Royal Bank of Canada's assistant chief economist.
TUESDAY: AVON CALLING
RBC expects the euro zone's labour report to show further, if modest, easing of unemployment in November, with a decline in the jobless rate of 0.1 of a percentage point to 8.7 per cent.
"Were the recent trend in the unemployment rate to continue through 2018, that could see the rate fall below 8 per cent by year-end," RBC said. "And the most recent country-level data provide a number of reasons to believe that is a possibility, with the September and October data showing unemployment at last beginning to fall in France."
In Canada, we get the latest look at the housing market. Canada Mortgage and Housing Corp. releases its monthly reading of construction starts, for December, which CIBC World Markets expects will show a drop in the annual pace.
"A very mild November gave builders soft ground for their shovels to break into, but December will be a different story," CIBC's Nick Exarhos said.
"Starts are poised to decelerate significantly from the 252,000 pace seen the prior month, coming down all the way to 207,000. Still, that's in line with the underlying trend in [building] permits, and still signals healthy demand for housing." There are also a couple of quarterly earnings reports, from Avon Products Co. and WD-40 Co.
WEDNESDAY: MORE HOUSING
Statistics Canada is expected to give us the second look at the housing market, with November building permits, which BMO believes will show a decline in value of 3 per cent.
Investors also get a glimpse of how consumer prices fared in China in December, along with financial results from Lennar Corp., among others.
THURSDAY: READY, MR. TRUMP?
China reports its latest trade reading, which will, of course, show another surplus in December, more ammunition for the Trump administration.
And some market biggies: Bank of America Corp. kicks off U.S. bank earnings, while Delta Air Lines Inc. also reports.
FRIDAY: HAPPY HOLIDAYS?
Federal Reserve watchers will be eyeing the U.S. report on inflation, which economists expect to show a dip to 2.1 per cent on an annual basis in December from 2.2 per cent a month earlier.
"A drop in gasoline prices over the course of the month likely left consumer prices up only 0.1 per cent on a seasonally adjusted basis in December," Royce Mendes of CIBC said.
"That will still leave headline inflation running at a decent 2.1 per cent, but that won't be much solace to Fed policy makers," he added. "A 0.2-percent increase on the core measure will see [core] inflation remain at 1.7 per cent, keeping central bankers cautious in the first quarter."
Alongside the inflation reading will be a report on retail sales, which analysts believe rose by about 0.4 per cent to 0.6 per cent in December.
"It was a decent holiday shopping season, the best since 2011, according to reports, paced by online activity, but even traditional retailers did okay," BMO deputy chief economist Michael Gregory said.
"We look for retail sales to rise 0.6 per cent in December, after rising 0.8 per cent in November, also reflecting a pickup in vehicle sales and a nudge up in (seasonally adjusted) gasoline prices."
On the corporate side, BlackRock Inc. reports results, as do JPMorgan Chase &Co. and Wells Fargo & Co.
Observers believe strong results from the Bank of Canada's business outlook survey will lock in a hike of one-quarter of a percentage point to the BoC's benchmark overnight rate, which sits at 1 per cent after two increases last year.