NEW YORK, July 15 (Reuters) - Following is the view from editors in the Americas on major news in the week ahead:
Watch Reuters Insider’s Week Ahead:
* U.S. House to work on debt bill as Aug. 2 deadline looms
* U.S. debt talks keep markets on edge
* U.S. jobs, housing data expected to be bleak
* Goldman, Bank of America, Intel post earnings
The acrimonious, high-stakes negotiations over raising the U.S. debt ceiling before a possible catastrophic default on Aug. 2 drag on, and it could be a crunch week. The House of Representatives is likely to spend the first part of the week debating and approving a bill from the Republican majority to raise the debt ceiling by the amount President Barack Obama has requested as long as Congress adopts a balanced budget amendment. This would be rejected by the Democrat-controlled Senate, but the vote could placate conservatives and give House Speaker John Boehner more leeway to work out a final compromise with the White House. A deal on raising the $14.3 trillion limit needs to be reached with enough time for its formal adoption — or the government will run out of money to pay its bills, causing a worldwide financial crisis.
Markets are casting their eyes to Washington and Frankfurt in the coming week to see if D.C. can finally resolve a budget dispute that is putting the United States at risk of default. Earnings are a big part of the week, but only if the debt deal gets out of the way. So far, the bond and stock markets don’t seem to put a high probability on such an event happening as Washington is getting nowhere. The stocks team will be watching a ton of earnings from major U.S. corporations such as Goldman Sachs, Bank of America, and Coca-Cola. The euro will likely be on the defensive, with the role of private-sector involvement in Greece’s second bailout package still uncertain. There is no regular bond supply, although sales of T-bills and TIPS will bear watching.
LATEST U.S. HOUSING, EMPLOYMENT DATA EXPECTED TO BE GLOOMY
Housing data will show little improvement in one of the sectors weighing on the economy. Sentiment among home building firms likely only edged up in July from near record lows. Builders have no incentive to break new ground with a glut of previously owned homes on the market. Housing starts are expected to have risen only modestly last month, and permits for future home construction likely eased. Sales of previously owned homes are expected to have risen in June but probably not enough to make a dent in the huge backlog of properties that is keeping prices depressed. Weekly jobless claims are unlikely to suggest much improvement in the labor market after a dismal June. The data covers the survey period for July’s nonfarm payrolls. Claims are expected to have risen, but the data is volatile during the U.S. summer due to seasonal adjustments.
GOLDMAN SACHS, MORGAN STANLEY, BofA POST EARNINGS
Goldman Sachs is expected to report a fourth straight quarter of declining trading results on Tuesday, with investment banking picking up some of the slack. Wall Street will be listening for comments on regulatory reform and how Goldman is positioning its business around new rules. Weak trading results are also expected at Morgan Stanley, reporting on Thursday, particularly surrounding a big inflation bet gone bad. On the commercial banking front, Bank of America, the largest U.S. bank by assets, is expected to announce a second-quarter loss of as much as $9.1 billion after an $8.5 billion settlement with angry investors who wanted the bank to repurchase billions in toxic mortgages.
Tech earnings get into full swing with blue-chip names IBM (Monday), Apple, Yahoo (both Tuesday), Intel (Wednesday) and Microsoft (Thursday) among those reporting quarterly results. The lineup will give investors a strong feel for whether technology spending is on the road to recovery or has hit fresh speed bumps — namely, economic troubles in Europe and supply problems in Japan. But the week could also provide answers to other pressing questions about the progress of Yahoo CEO Carol Bartz, Apple’s iPad sales and Microsoft’s future. Other top earnings of the week include Gannett (Monday), New York Times and AT&T (Thursday) and Verizon (Friday).
A handful of the nation’s top manufacturers — including General Electric, Caterpillar, Honeywell, Rockwell Collins and ITW - report results. The market will listen closely for direction, particularly from top CEOs including GE’s Jeff Immelt and Caterpillar’s Doug Oberhelmann, hoping to know better whether the recovery is gaining steam or falling off pace. That same concern applies to earnings reports from the likes of Coca-Cola (Tuesday), McDonald’s, PepsiCo (Thursday) and a host of other consumer companies, with much attention expected to be paid to rising costs for commodities and labor and how much consumers are willing to pay for food and drinks.
HEALTH OF HEALTHCARE: J&J, UNITEDHEALTH, ABBOTT AND LILLY
The earnings season goes into full gear for large U.S. healthcare companies on Tuesday when Johnson & Johnson reports. Investors are hoping for clearer signs that J&J’s array of new drugs and drugs in late-stage trials are reviving their long-underperforming pharmaceuticals business, and that the company is making swift progress in fixing quality-control lapses that have sparked repeated recalls of Tylenol and other consumer brands. UnitedHealth kicks off for the health insurance industry on the same day, and on Wednesday, Abbott Laboratories is expected to report 10 percent earnings growth, as sales of rheumatoid arthritis drug Humira more than offset weakening sales of triglyercide drugs whose effectiveness has been called into question. Also on Thursday, Eli Lilly is expected to report lower earnings.
A central defendant in the Galleon insider-trading probe is expected to learn her fate on Wednesday. Danielle Chiesi, a former high-school beauty queen-turned-hedge-fund-trader, will be sentenced by in a federal court in Manhattan. Chiesi confessed in January to “crossing the line” by illegally passing on tips involving Advanced Micro Devices Inc and IBM. Prosecutors want her sentenced to up to four years in prison. Whatever sentence she gets, it could signal what is in store for Galleon founder Raj Rajaratnam, who was found guilty in May of a host of insider-trading related charges.
Brazil’s central bank is widely expected to raise its benchmark interest rate again, to 12.50 percent from 12.25 percent on Wednesday. Less clear is how much higher rates will go as inflation and growth remain strong; investors will pore over the bank’s post-meeting statement for clues. Also on Wednesday, Mexican retail sales for May will show whether domestic demand is picking up at all. Central bank meeting minutes in Mexico on Friday will probably confirm that the central bank is in no hurry to raise interest rates, two years since its last move.
Canadian markets will focus on the Bank of Canada’s interest rate decision and quarterly Monetary Policy Report. While the central bank is all but certain to keep its key policy rate unchanged, investors are hungry for hints on the timing of its next tightening. Bank Governor Mark Carney, who holds a news conference on Wednesday, is caught between domestic data many say is healthy enough to warrant a hike, but major external risks, including Europe’s sovereign debt crisis and the U.S. debt ceiling debate.