4 Key Economic Events to Watch This Week

1. Federal Reserve Minutes The Fed is to release minutes from its July 28-29 meeting on Wednesday, which investors are hoping will provide more clarity on its plans to hike short-term interest rates for the first time since 2006, after recent economic reports indicated that the economic recovery is on track. 2. Japan GDP data Japan is to release what will be closely watched preliminary figures on second quarter economic growth on Monday. The consensus forecast is that the data will show that the world’s third-largest economy contracted 0.5% in the three months to June after a first quarter expansion of 1.0%. A weak reading could spur expectations for fresh stimulus measures from the Bank of Japan. 3. Chinese manufacturing data China is to release preliminary data on manufacturing activity on Friday. The Chinese government decided this week to devalue the yuan after a recent string of data pointed to slowing industrial and economic growth in the world’s second-largest economy. The decision sparked fears of a "currency war" and roiled global financial markets. Uncertainty over the impact of the devaluation on global inflation expectation have also sparked fears that the Fed could keep rates on hold for longer. 4. Euro zone PMIs The euro zone is to release preliminary data on manufacturing and service sector activity on Friday. Last Friday, data showed that economic growth in the single currency bloc slowed in the second quarter as the uncertain global outlook weighed, one day after the European Central Bank warned that volatility in Chinese markets may have more impact than expected on the euro zone.

Investors to look at Fed, earnings with China filter

NEW YORK (Reuters) - Investors will comb through Wednesday's minutes of the most recent Federal Reserve meeting for indications on how the U.S. central bank will react to the recent yuan devaluation and the further decline in oil prices. The recent outperformance of bank stocks and underperformance of utilities, both on expectations of higher Treasury yields, support current market bets that the Fed will raise rates for the first time in nearly a decade after its mid-September meeting. The performance gap between the two sectors widened in favor of financials to its largest since May 2008 shortly after the Fed's July meeting. But this week, following the nearly 3 percent devaluation in China's currency and a steepening decline in oil prices, it narrowed to its tightest in more than a month. Strategists at Bank of America/Merrill Lynch said in client notes in the past week that China's move may be the early stages of a near 10 percent devaluation of the yuan against the U.S. dollar over the next year. Such a move could translate to a 5-percent drop in Brent crude , they said. "Most likely, there will be more volatility in the market and part of the reason is oil prices and the worry that somehow the price of oil is a reflection of inflation and deflation," said Quincy Krosby, market strategist at Prudential Financial (NYSE:PRU) in Newark, New Jersey. "The lower (oil) goes, the more it is a deflationary barometer. The lower it goes, the more difficulty the Fed has raising rates." The Fed mentioned "earlier declines in energy prices" on its latest statement on July 29, and their downward pressure on inflation. Since that day, U.S. crude has fallen more than 12 percent. PAST THE FED, FUNDAMENTALS Even if the yuan seems to have stabilized, its 3-percent drop against the U.S. dollar and the possibility of a further slide will continue to be something to watch for highly exposed companies. The devaluation did hit companies in several sectors, including high-end retailers like Coach (N:COH) and Tiffany (N:TIF). Apple (O:AAPL), which gets about 23 percent of its revenues from China, according to Morgan Stanley (NYSE:MS), tumbled this week to a near seven-month low. For importers from China like Target (N:TGT), Walmart (N:WMT) and Home Depot (N:HD), both reporting next week, the tailwind is expected to be offset by the expectation of a slower global economic growth, according to Michael Yoshikami, CEO of Destination Wealth Management in Walnut Creek, California. Estee Lauder (EL), expected to post earnings on Monday, is among the first high-end retailers to report after the yuan devaluation. Its stock was on track on Friday to close the largest weekly drop since late May. "The whole Chinese luxury goods market, especially imported beauty products, has been on fire for years, but in the last year things have really turned around," said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.

Media stock selloff leaves Wall Street bruised

(Reuters) - Wall Street ended sharply lower on Thursday as weak earnings reports from media companies stirred fears that more viewers are ditching cable TV, dragging the sector to its worst two-day loss since the financial crisis. The selloff was compounded by nervousness ahead of key jobs data on Friday that could provide clues about the timing of the first Federal Reserve interest rate hike in almost a decade. Viacom (O:VIAB) fell 14.22 percent to its lowest in almost four years after reporting lower-than-expected quarterly revenue due to weakness in its cable TV business. Walt Disney (N:DIS) was off 1.79 percent and down for a second session after it lowered profit guidance for its cable networks unit on Tuesday. The S&P 500 media index <.SPLRCMDIA> lost 2.12 percent and notched its biggest two-day fall since November 2008, with Time Warner (N:TWX), Comcast (O:CMCSA) and CBS (N:CBS) all in the red and Twenty-First Century Fox (O:FOXA) down 6.4 percent. "All the media stocks are down and it seems people just want to get out of the sector at any cost and take any loss," CLSA analyst Vasily Karasyov said. Viacom's results and Disney's warning put the spotlight on a trend of viewers shifting from cable TV to Internet-based services such as Netflix (O:NFLX), which rose 2.21 percent. The Dow Jones industrial average (DJI) fell 0.69 percent to end at 17,419.75 and the S&P 500 (SPX) lost 0.78 percent to 2,083.56. The Nasdaq Composite (IXIC) dropped 1.62 percent to 5,056.44, its biggest one-day tumble since early July. Eight of the 10 major S&P sectors were lower, with the health index's <.SPXHC> 2.09 percent fall leading the decliners. Allergan (N:AGN) fell 5.1 percent after the Irish drugmaker reported a second-quarter loss. In other earnings-driven stock moves, Tesla (O:TSLA) fell 8.88 percent and Keurig Green Mountain (O:GMCR) slumped as much as 29.75 percent after reporting disappointing numbers. Investors were also jittery ahead of the release of U.S. non-farm payroll numbers, which are expected to have risen by 223,000 in July, matching gains in June. The Fed has said it will raise rates only when it sees a sustained recovery in the economy. After the bell, Zynga (O:ZNGA) fell 6 percent after it posted a disappointing quarterly report. With about three-quarters of the S&P 500 companies having reported, second-quarter earnings are estimated to have increased 1.6 percent while revenues are projected to have fallen 3.4 percent. However, valuations look stretched. The S&P 500 is trading at a 25 percent premium to its historical median price-to-sales ratio, Jack Ablin, chief investment officer at BMO Private Bank said in a note to clients. In Thursday's session, declining issues outnumbered advancing ones on the NYSE by a rate of 1.47 to 1. On the Nasdaq, that rate was 2.46 to 1 favoring decliners. The S&P 500 index posted 18 new 52-week highs and 44 new lows; the Nasdaq Composite saw 64 new highs and 169 new lows. About 7.8 billion shares changed hands on all U.S. exchanges, well above an average 6.77 billion in the past five sessions, according to BATS Global Markets data.