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Diary: Fed Meeting, Oz Jobs, G7 Fallout

A summit, three meetings of the world’s most powerful central banks, some key data, especially Australian jobs figures for May and more on the trade war with China - yet another big week for the global economy to contend with.

In Australia it will be a quieter week after the RBA decision and GDP surprise last week.

The next four days will see April housing finance out today, along with the NAB business survey for June, consumer confidence data tomorrow (Wednesday) and May jobs data on Thursday which is forecast to show a 10,000 gain but unemployment falling back slightly to 5.5%.

We also have speeches by RBA Governor Lowe on Wednesday and Assistant Governor (Economics) Ellis on Friday which will both be watched for any clues on interest rates. Dr Ellis will be speaking after the US Fed lifts rates, Dr Lowe before.

After President Trump’s petulant dummy spit at the Group of Seven summit at the weekend, who knows what he will say and do (and how childish he will be) if North Korea’s Kim Jong-un stands up to the American bullying at today’s summit and tries his own brand of negotiations?

At the same time, Trump will antagonise China with his expected final list of $US50 billion of Chinese imports to be covered by a 25% tariff on Friday, thereby raising the heat on global trade.

The AMP’s Chief Economist, Dr Shane Oliver points out that “If the US-North Korean summit makes no progress markets will react negatively but not dramatically as there is a lot of scepticism around the summit.”

“More likely is that some sort of progress towards an agreement for North Korea to phase down its nuclear capabilities will be achieved (as otherwise neither side would have agreed to participate),” he wrote.

He also believes that on the trade front, “while the US may announce the finalised list of Chinese imports to be subject tariffs on Friday, it may delay implementation if negotiations are progressing well.”

But Trump left the G-7 meeting spewing tweets, threatening the Canadian Prime Minister and Canada with more tariffs, so the growing instability in the US-Canada relationship could spill over into the Nafta talks with the Canadians and Mexico, further damaging trade and global growth.

In Trump’s current belligerent, bullying mood this week’s expected interest rate rise from the US Federal Reserve could become another flashpoint if one of the Fox News Channel fools thinks a rate rise is wrong.

That is possible with his economic adviser, Larry Kudrow a former Fox pundit and weak on understanding monetary policy (he’s big on tax cuts).

The Fed will raise its key rate to the range of 1.75% to 2% and announce it early Thursday morning, so watch for any tweets from Trump.

What will be more interesting will be the Fed’s updated forecasts for the US economy, especially the dot plot which shows where Fed members think interest rates will be in coming months.

At the moment economists think the next move will be in September and followed by one in December and taking the rate to 2.75% by year’s end, Fed chair, Jay Powell will also hold a media conference after the post-meeting statement and forecasts are released.

On the data front in the US May core inflation is out tonight, our time, retail sales (Thursday night) and industrial production (Friday night) - all are expected to have remained strong.

In Europe, the ECB is not expected to make any changes to its monetary policy at its meeting on Thursday but it will be watched to see what it says about the Italian situation and whether it provides any idea as to what it will do with its quantitative easing program after the current guidance ends in September.

Meanwhile the Bank of Japan is expected to make no changes to its monetary stimulus program at its two day meeting on Thursday and Friday,

Core inflation has fallen back to 0.4% year on year (and economic activity seems to be taking a breather) and Dr Oliver says there is no sign of any move to the exit doors from easy money.

Dr Oliver also wrote that Chinese economic activity data on Thursday is expected to show a slowing in industrial production to 6.8% year on year, investment growth unchanged at 7% and retail sales growth picking up to 9.7%.

In Britain, Prime Minister Theresa May faces parliamentary votes that could challenge her Brexit policy as the EU withdrawal bill returns to the House of Commons on tonight.

In Russia, the 2018 Fifa World Cup gets underway on Thursday with host Russia taking on Saudi Arabia in Moscow.

UBS Investment Research suggests Germany, Brazil and Spain have “the highest likelihood of winning” and have picked defending champion Germany as the winner.

View More Articles By Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.



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