[ForexNews]

Equity markets pulled back last week with the S&P losing 2%. Oil was the big loser, down 10%. Key data releases this week include US retail sales (Tuesday). Analysts are looking for a solid gain in June (up 0.9% mom vs. 0.5% consensus), although much of this improvement should be driven by higher outlays on gasoline. On Wednesday we get US and Euroland CPI and IP data. We also get the results from the July US Empire State Survey. On Thursday, we get GDP data from China. Market looks for growth to increase further to 7.8% yoy in Q2, up from 6.1% in Q1. We also get the all important Philly Fed release. On Friday we get US housing starts. Analysts estimate that starts rose 2.5% in June, while consensus is expecting a 0.4% drop.

Beyond the economic data flow, next week will be the first full week of Q2 earnings releases. Bottoms up estimates suggest that on a sequential basis, S&P ex-financial earnings and profit margins should improve in Q2. Barring big data revisions, this suggests that US productivity (which is measured simply as output per hour worked) was very strong last quarter – indeed stronger than what one often sees during a robust cyclical expansion. So a pick up in profit margins may not be that surprising. A key question will be what sort of management commentary we get about the back half of the year and whether the savage cost cutting that US firms have undertaken to boost productivity in the near term will be at the expense of future sales.