January 28, 2016 / 7:34 PM / 2 years ago

What to Watch in the Day Ahead - Friday, Jan 29

(The Day Ahead is an email and PDF publication that includes the day's major stories and
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The Commerce Department issues advance (first estimate) U.S. fourth-quarter gross domestic
product data. Economic growth likely braked sharply as businesses doubled down on efforts to
reduce an inventory glut and unseasonably warm weather slowed consumer spending. There is a risk
that the economy actually contracted, but given that some of the factors weighing on growth are
temporary, activity is expected to rebound in the first quarter. According to a Reuters survey
of economists, the report is likely to show that GDP increased at a 0.8 percent annual rate,
after growing at a 2.0 percent rate in the third quarter. (0830/1330) Separately, the employment
cost index is expected to show a solid increase in wage growth in the fourth quarter, at 0.6
percent after a similar gain in the third quarter. (0830/1330)

Chevron Corp, the second-largest U.S. oil producer, is expected to post a sharp drop in
quarterly profit as tumbling commodity prices and extensive delays in new natural gas projects
erode margin.

Payments network operator Mastercard Inc is expected to report a fall in fourth-quarter profit,
hurt by a strong dollar, as markets outside the United States account for nearly 60 percent of
its purchase volumes. Mastercard said in September it expected operating expenses for 2015 to
grow in high single digits due to ramping investments in China and continued digital-related
spending. Investors will look for the company's update on gas prices, foreign exchange headwinds
and rebates.

Federal Reserve Bank of San Francisco President John Williams participates in a panel before the
Commonwealth Club, Bank of America/Merrill Lynch Walter E. Hoadley Annual Economic Forecast
event in San Francisco. (1530/2030)

AbbVie Inc is expected to report fourth-quarter profit and revenue above Wall Street estimates,
according to Thomson Reuters StarMine. The company in October forecast double-digit EPS growth
through 2020. AbbVie had some good news earlier this month when U.S. patent officials denied
Amgen's efforts to market a biosimilar version of its drug Humira, considered the world's
top-selling prescription medicine. Investors will be looking for additional color on other
patent challenges and biosimilar developers, and also how the FDA-mandated potential liver
injury warning on AbbVie's hepatitis C drugs have impacted sales.
Honeywell International Inc, the maker of aircraft parts and climate control systems, is
expected to report a higher fourth-quarter profit, helped by cost controls. The company, which
counts Boeing Co and Bombardier Inc among its customers, has cut jobs and sold or merged
businesses to reduce costs. However, a strong dollar and weak demand from oil and gas customers
could affect revenue.
Colgate Palmolive Co, the world's biggest toothpaste maker, is grappling with a strong dollar
that has reduced the value of sales from overseas. Colgate, which gets about 66 percent of sales
from outside North America, has raised prices in markets like Latin America and Africa to
cushion the impact of the dollar. However, that has led to a drop in unit volume in these
regions. Colgate cut its full-year profit forecast in October to reflect the changes in foreign
exchange rates, which generally have a double-digit impact on sales. Investors will look for any
updates to the forecast and whether the company has other plans to offset currency impacts.
American Airlines Group Inc, the world's largest airline, reports fourth-quarter results and
will issue guidance for early 2016. The airline is expected to discuss its decision to write off
half a billion dollars of revenue trapped in Venezuela due to currency controls there, as well
as increased competition in Latin America from its U.S. rivals.

U.S. refiner Phillips 66 is expected to report a higher profit in the fourth quarter, helped by
lower crude prices. Refiners have been adding units, revamping old ones, and re-tooling
processes to run more domestic crude amid robust gasoline demand.
Xerox Corp, best known for its printers and copiers, is set to report results below market
estimates for the ninth straight quarter as corporate customers cut printing costs and consumers
shift to mobile devices. Xerox, which has lost more than a third of its market valuation in the
last one year, said in October that it would review its businesses and capital allocation
options, but was not currently considering a sale of the company. Activist investor Carl Icahn
disclosed a stake in the company and said he would look to get board representation and pursue
strategic alternatives. Analysts will be looking for further details on the restructuring and
any outlook.

The coal and natural gas producer Consol Energy is expected to report a fourth-quarter loss,
compared with a year-ago profit, hurt by weak commodity prices. The company, which has shifted
focus to natural gas production from coal mining, cut its 2016 capital budget for its oil and
gas business earlier this month, citing falling commodity prices.

Canada's economy is expected to have grown by 0.3 percent in November, underscoring expectations
that the fourth quarter was likely weak at best. The Bank of Canada recently forecast that the
economy likely stalled in the quarter, not long after the country emerged from the mild
recession in the first half of 2015. Producer prices likely fell 0.3 percent in December after
dropping 0.2 percent the prior month. (0830/1330)

Brazil's primary public sector budget deficit likely widen sharply in December, the country's
central bank is expected to report. According to a Reuters survey, Brazil is expected to post a
hefty deficit of 65.15 billion reais, most likely its biggest overall gap ever, which again
signals the difficult challenge Rousseff faces to rebalance the public accounts. (0730/1230)

LIVECHAT-THE WEEKAHEAD with Reuters markets editor Mike Dolan
Join Mike Dolan as he goes through the key macroeconomic and political themes for the coming
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 (Compiled by Astha Rawat in Bengaluru; Editing by Savio D'Souza)
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