Well, there’ll be quite a few things influencing the week ahead and they won’t be actual events.
For example, here in Australia the struggle by the Babcock and Brown investment bank and its empire to survive, will dominate the week ahead.
This struggle will become more and more bitter: even if the company manages to somehow right the ship and stave off the flood of problems, its medium term future is shot to bits.
It is going to be matched by the impact of oil prices, which remain above $US134 a barrel, and the rising US dollar, which so far hasn’t had a dramatic impact on commodity prices, except to shake them up from time to time. A further rise in the dollar could make life difficult for a lot of recent investors in commodities.
Saudi Arabia’s decision to further boost its oil output by 200,000 barrels a day (on top of the 300,000 announced earlier this month) will put downward pressure on prices today and tonight, and help the US dollar rise.
Oil finished at $US134.86 in New York on Friday night.
The Group of 8 finance ministers’ statements on oil and commodities was next to useless. To complain about the problems caused by rising commodity prices, including foodstuffs, is a bit rich considering the US and major European governments have refused to do anything about ending the outrageous limits on food production and the huge subsidies.
What was more important were their careful comments on the value of the US dollar, and what the greenback did in the market late last week.
Corn prices are going to head higher in the US because of the floods in the Midwest and this will start to have a bigger impact on food price inflation in the US and Asia as the year goes on.
In Britain it will be the struggle of UK banks and building societies to keep their heads above water, plus inflation, which is the major issue around the world.
That will again be obvious this week. Friday’s US Consumer Price Index might have been ‘benign’ from the point of view of economists, but headline inflation is running at 4.2% annually and that is hurting US consumers.
This week sees the impact of inflation on business and industry with the release of the Producer Price Index, housing starts, a survey of home builders, industrial production and a couple of business surveys.
The PPI is out tomorrow night, our time, along with May new house starts and permits, industrial production for the same month and the current account figures for the March quarter.
Major Wall Street investment banks Goldman Sachs, Lehman Bros and Morgan Stanley are due to release poor results next week, hampered by more write-downs and a sizable loss at Lehman. It said last week it lost $US2.8 billion in the quarter and raised $US6 billion in new capital.
It also fired its chief operating officer and demoted its chief financial officer. Lehman shares rose Friday when investment group, Blackrock said it had bought into the bank.
Goldman Sachs releases tomorrow night, Morgan Stanley Wednesday night (our time) and Lehman Bros, possibly Tuesday. Its results will confirm last week’s preliminary figures.
In Australia, it’s a quiet week but the release of the minutes from the last RBA Board meeting tomorrow will be watched closely for more clues on interest rates.
MONDAY:
Rio Tinto CEO, Tom Albanese speaks at a Sydney lunch; Zinifex scheme meeting for the merger with Oxiana in Melbourne; Queensland coal conference in Brisbane.
TUESDAY:
RBA board minutes for June released; dwelling start figures for March quarter released by the Australian Bureau of Statistics.
WEDNESDAY:
ABA short term arrival and departure figures for May; Merrill Lynch emerging companies conference in Sydney.
THURSDAY:
RBA monthly bulletin; ACCC chairman, Graeme Samuel speaks in Sydney at a business lunch; ACCI-Westpac Survey of industrial trends for June; Arrow Energy EGM.
FRIDAY:
Westpac/Melbourne Institute leading index of economic activity for May.
