There’s only one big event this week and that’s the two-day US Federal Reserve meeting in Washington that won’t see a lift in US interest rates.
Despite the best attempts of bears to scare up an inflation bogey-led rate rise, it won’t happen because fear and loathing is returning to parts of the US economies.
The US banking sub index of the Standard & Poor’s 500 fell to its lowest level since 1996 as more regional banks reported problems with losses, write-downs, new capital issues and dividend cuts.
There were more signs the US economy is sicker than the retail sales and other seemingly robust figures suggest; the International Monetary Fund now sees the economy "stagnating" which about sums up the current outlook.
With oil prices still strong, and likely to remain firm after the Saudi oil summit yesterday, and food price inflation back worrying more people, you’d need rocks in your head and somewhere else to believe the Fed will lift its key rate from the current 2% level.
But that won’t stop the Fed from indicating that the downside risks to economic growth are now broadly offset by the upside risks to inflation.
The AMP’s Dr Shane Oliver says that "while the US economy has managed to avoid recession and the Fed has been signalling that it is becoming more worried about inflation, it’s hard to see the Fed delivering on market expectations for interest rate hikes by year end because economic growth is likely to remain very weak and as the US financial sector is likely to continue to struggle.
"In fact, we see the risks as still being skewed towards rate cuts," he said in a note on Friday to clients.
Being the week before the end of the financial year, it’s going to be quiet with new motor vehicle sales and job vacancies set for release.
The Fed’s deliberations will make the economy the central issue and will be released Thursday morning, our time.
So will figures for US consumer confidence, home prices, house sales, durable goods orders and more inflation data
An interesting corporate earnings report will be from Number 2 US cereal maker, General Mills midweek. It will be worth watching for what they say on cost increases from higher corn, soy and wheat prices, plus the rising cost of energy.
Two major US home builders, Lennar Corp and KB Home are due to report results on Wednesday and Thursday, respectively and their comments will add to the latest figures on new and existing home sales and prices. Will we learn if the US housing depression is reaching the bottom?
MONDAY:
Australian Bureau of Statistics figures for new car sales for May; Lion Selection shareholders meet in Melbourne to vote on sale of Indophil stake to Xstrata; Uranio AGM in Perth; Great Basin Gold AGM Vancouver, Canada.
TUESDAY:
BHP Billiton CEO, Marius Kloppers holds a steel making business briefing Sydney/London. Brambles trading update due.
WEDNESDAY:
World Wealth report from Merrill Lynch; Energy Conference starts in Sydney.
THURSDAY:
ABS job vacancies figures for May quarter.
FRIDAY:
Speech by Guy Debelle, Reserve Bank Assistant Governor (Financial Markets) on open market operations.
