Important week to provide guidance on sales and inflation trends entering the crucial holidays season. Will the U.S. consumer save the year (again) and help clear excess inventories to begin 2016 on a stronger production footing? We certainly need a good JOLT.
- Tuesday: NFIB Small Business Optimism Index for September.
- The Producer Price Index
- Retail sales
- Manufacturing and Trade: Inventories and Sales (business inventories)
- The Consumer Price Index
- NY Fed Empire State Manufacturing Survey for October.
- Philly Fed manufacturing survey for October.
- Industrial Production and Capacity Utilization for September.
- Job Openings and Labor Turnover Survey
Slowing growth in emerging markets and slumping commodity prices are posing fresh challenges to the euro-area economy, which may need to be countered by adjustments to quantitative easing, European Central Bank President Mario Draghi said.
“Developments surrounding the slower growth in emerging-market economies are posing renewed risks to the euro-area outlook,” Draghi said on Friday in a statement at the annual meetings of the International Monetary Fund in Lima. Even so, the region is proving “resilient” and headline inflation is expected to rise toward the end of the year because of base effects relating to energy prices, he said. (…)
Policy makers “are ready to use all the instruments available within our mandate to act, if warranted, in particular by adjusting the size, composition and duration of the asset-purchase program.” (…)
Chinese Officials Pledge Flexibility on Exchange Rate A top Chinese central banker said the yuan exchange rate would become “more flexible,” suggesting China will continue to unwind its tight grip over its currency.
But Yi Gang, deputy governor of the People’s Bank of China, also sought to reassure investors by noting that still-strong economic fundamentals in China would prevent the currency, also known as the renminbi, from depreciating too much.
“The still-large trade surplus serves as an important support of the RMB exchange rate,” he told his counterparts gathering here on Friday for the International Monetary Fund’s annual meeting. “Going forward, the market-based RMB exchange-rate reform will continue to proceed, and the RMB exchange rate will become more flexible, floating around the equilibrium level in both directions.” (…)
Overall, Mr. Yi said Chinese economic growth would proceed at a steady pace, although one that “has transited away from two-digit or near-two-digit high growth to medium-high growth with better quality and structure.” (…)
Analysts lowered earnings estimates for the S&P 500 for Q3 2015 by a smaller margin than average during the quarter. On a per-share basis, estimated earnings for the third quarter fell by 3.7%. This percentage decline was smaller than the trailing 1-year (-5.3%), 5-year (-3.8%), and 10-year averages (-5.1%) for the
bottom-up EPS estimate for a quarter.
Fewer companies have lowered the bar for earnings for Q3 2015 as well. Of the 108 companies that have issued EPS guidance, 76 have issued negative EPS guidance and 32 have issued positive EPS guidance. The percentage of companies issuing negative EPS guidance is 70% (76 out of 108), which is below the 5-year average of 72%.
And well below Q2’s 75% and Q1’s 84%.
At the start of the peak weeks of the Q3 2015 earnings season, the blended earnings decline for the third quarter stands at -5.5%. Factoring in the average improvement in earnings growth during a typical earnings season due to upside earnings surprises, it still appears likely the S&P 500 will report a year-over-year decline in earnings for the third quarter. If the index does report a year-over-year decline in earnings for the third quarter, it will mark the first time the index has reported two consecutive quarters of year-over-year declines in earnings since Q2 2009 and Q3 2009. (…)
If the Energy sector is excluded, the blended earnings growth rate for the S&P 500 would jump to 1.8% from -5.5%.
That was +2.3% last week, +2.9% the week before.
The blended year-over-year sales decline for Q3 2015 is -3.3%, which is also higher than the estimated revenue decline of -2.5% at the start of the third quarter. If the Energy sector is excluded, the blended revenue growth rate for the S&P 500 would jump to 2.2% from -3.3%.
On June 30, the estimated earnings growth rate for Q4 2015 was 4.3%. By September 30, the estimated growth rate had declined to 0.2%. Today, it stands at -0.4%. Eight sectors have recorded a decline in expected earnings growth for Q4 2015 since June 30 due to downward revisions to earnings estimates, led by Energy and Materials sectors.
The Rule of 20 P/E is currently 18.9 using Thomson Reuters’ trailing EPS of $118.15 (after Q3). Fair value is 2150, +6.8% from the current 2013. There is a big hurdle at 2060 where the 200 day m.a. currently sits on a declining slant. This week filled with important stats is going to be interesting…
Global tax deal targets multinationals Clamp on avoidance could raise up to $250bn a year, says OECD
The world’s leading finance ministers agreed on Friday to change the rules on taxing profits, and warned multinational companies they could no longer use their size and international presence to dodge taxes.
Under the rules, companies such as Starbucks, Amazon and Google will find it harder to concentrate their profits in low-tax countries and tax havens — a shift that promises to raise up to $250bn a year in extra tax revenues, according to the OECD. (…)
The plans to crack down on corporate tax avoidance were devised by more than 60 governments in the first overhaul of the rules for taxing profits for nearly a century. (…)
The new rules, called “base erosion and profit shifting” or Beps, are designed to improve transparency, close loopholes and restrict the use of tax havens. (…)
Even though many governments have already moved to tackle tax avoidance by multinationals, there have been doubts about how uniformly the measures will be implemented. In particular, the Beps project will not change US law, although the US Treasury intends to introduce new transparency rules, requiring companies to say where they make their profits and pay their taxes.
Governments only agreed to apply minimum standards to some aspects of the new rule book, such as measures to stop the abuse of tax treaties. They will not be obliged to implement other recommendations, such as curbs on the tax deductibility of interest payments for which governments have agreed a “general tax policy direction”.