Once again it’s the economy and statistics that will dominate events in the US and in Australia.
China’s market rebound late last week ran out of steam on Friday and if the slump resumes this week, there will be a lot of nervy people, despite all the confident sounding commentaries last week.
So what lies ahead?
In the US it will be the Fed’s two-day meeting culminating in Thursday morning’s announcement.
The best bet is a rate cut of 0.25% and some indication from the Fed that the interest rate reductions are over for the time being.
There’s also a school of thought that says the Fed might sit tight, not change rates, but send a message that if things get worse, then it will do something to relieve any pressures, and then wait to see how the markets and economy react.
The US dollar had a strong advance late last week on this suggestion while commodities trembled until bad news about oil supplies caused a late shift in sentiment.
Bond markets are telling us they reckon a pause could very well happen.
Overnight Wednesday will also see the first of three estimates for US economic growth for the March quarter: the expectation is for growth of 0.2%, but many analysts reckon the economy fell into negative territory in the quarter.
Friday sees the April jobs and unemployment numbers. Another big month for job losses (around 232,000 in the March quarter, so far) will worry investors who have become confident the worst is over. The forecast is for a loss of around 85,000.
Good GDP and jobs figures will see the rally resume and it wouldn’t surprise to see Wall Street climb into positive territory this week for the first time this year.
Another US figure to watch is house prices: statistics out last week showed the median price of new homes sold in the US in March fell more than 13%: this week it’s the Much respected Standard & Poor’s Case Schiller House Price Index: it’s already showing a fall of around 10% in US house prices in major markets. It’s out Wednesday, our time.
The US first quarter reporting season continues with around 120 S&P 500 companies to announce this week: earnings outside of financial and home builders have been a bit stronger than thought.
Energy stocks, the best-performing sector of the S&P, will be in focus with BP and Shell reporting in the UK, and Exxon Mobil and Chevron Corp in the US.
Three other blue chips are due to report and their figures will tell a lot about domestic demand, and some areas of international business: telecoms giant Verizon Communications, General Motors Corp. and consumer products giant, Procter & Gamble Co, will all produce figures that will tell analysts a lot about the health of the economy and business.
GM is raising concerns about the health of its 49% owned finance affiliate, GMAC (51% owned by a private equity group). Other consumer giants, Clorox and Avon, are also due to report.
Food giants, Kellogg and Kraft will reveal the impact of the very sharp rise in food costs in the past quarter when they report as well this week.
GMAC’s home lending arm, Residential Capital, has become a black hole and there are growing fears that the basic car financing business is being hurt by the subprime and other losses.
In Australia, data for new home sales, private sector credit, plus March building approvals and retail sales are due for release.
The rise in interest rates and falling housing finance suggest that building approvals will remain soft and real retail sales are likely to have fallen in the March quarter highlighting the emerging slowdown in Australian economic growth.
Any sign of strength in building approvals (unlikely) and retail sales (possible) will increase the odds of Reserve Bank action on interest rates at its board meeting either tomorrow week or on the first Tuesday in June.
Westpac’s interim earnings result due Thursday will also be watched closely, with new CEO, Gail Kelly (ex St Gorge CEO) leading the briefings for the first time.
Also reporting is Orica, the explosives and mining services giant which will releases its interim later today.
MONDAY:
Housing Industry Association State and National Outlook for March quarter; Orica interim results; Boart Longyear AGM; Signature Brands shareholder meeting.
TUESDAY:
HIA March quarter trades report; Aristocrat Leisure AGM; Petsec Energy AGM.
WEDNESDAY:
Reserve Bank Financial Aggregates for March; HIA New Home Sales figures for March.
THURSDAY:
Australian Industry Group/PricewaterhouseCoopers April Performance of Manufacturing Index; Australian Bureau of Statistics Building Approvals for March; RBA monthly Commodity Price Index; GPT Group AGM; Woodside Petroleum AGM; Henderson Group AGM; Westpac Interim results.
FRIDAY:
Santos AGM; ABS Retail Trade figures for March; Resmed 3rd quarter results; Oil Search AGM.
