It’s going to be another week where some important economic figures in the US and elsewhere will drive sentiment around the world.
But in Australia tomorrow is shaping as a big day for confidence in the banking sector and in Macquarie Group.
That’s when its interim financial results will be released for it and Macquarie Bank. A substantial drop in earnings is expected. The shares have more than halved in the past year on worries that Macquarie and its business model will be hurt badly.
But unlike some of its imitators, such as Babcock and Brown, Macquarie is still standing and not a basket case.
It closed at $22.73 on Friday, its latest 52 week low.
Its high in the same period was $82.85. The fall was due to analysts forecasting a steep drop in earnings for the bank.
It was also sold off on the renewed concerns about bad debt levels among the banks in 2009 that was sparked by the Commonwealth bank’s earnings update last week which wasn’t a happy one for the sector.
In the US, the Federal Reserve will release the minutes of its October meeting and this is likely to give the impression that interest rates may be cut further.
Additionally, data for industrial production, housing starts and permits, inflation and a couple of business surveys will be released.
As well, Congressional hearings are scheduled to debate aid to the car industry, especially General Motors.
The political debate will continue with intense negotiation between Democrats and lame duck Republicans and the Bush Administration about an aid deal.
All the major statistics to be released in the US in the coming week are expected to show continued weakness.
The US Producer Price and the Consumer Price Indices will give us an idea of what inflation is doing: watch it show a very sharp fall in both measures as the plunge in oil and petrol prices has a very dramatic impact.
The October PPI is due on Tuesday (US time), with October CPI the day after. The price of US crude oil plunged a record 32.62% in October to settle at $US67.81 a barrel (and is now $US10 a barrel cheaper this month).
Economists polled by Reuters and Bloomberg expect the fall in petrol and oil prices to send the PPI down 1.7% in October, compared with a 0.4% fall for September.
Overall CPI is forecast to drop 0.7% in October, compared with September’s flat reading.
Other major economic indicators next week will include the Fed’s data on October industrial production, October housing starts and weekly jobless claims.
The housing starts will be very poor, but the key to look for is the level of building permits (that’s the initial step in the chain in the US). That figure could be very low as the credit freeze choked off lending in the month.
Economists are expecting a small rise in industrial production in the month after September’s big fall, but that’s open to question as retail sales (including cars) revealed a very, very weak month with that record 2.8% fall, and a fall in business inventories.
Major retailers will dominate third quarter earnings reports and after the damage done by the retail sales slump, poor reports are expected from Target, Lowe’s, Home Depot (both hardware type chains) and computer maker, Dell. Food group Heinz might produce reasonable numbers Friday.
The retailing slump will be emphasised by poor reports also from specialty apparel retailers Gap Inc and Limited Brands. JC Penny, Nordstrom and even Wal-Mart trimmed their outlooks for the fourth quarter (and 2009 in a couple of cases).
Best Buy, the big electricals retailer said its sales and earnings had been hit by an event of ‘seismic proportions" and its biggest competitor, Circuit City collapsed a week ago and is now in bankruptcy protection.
Japanese September quarter GDP data is expected to show a second consecutive quarterly fall, meaning Japan joins the Eurozone, plus countries like New Zealand, Ireland, Denmark, Germany and Italy in being in recession.
In Australia we will get the Minutes from the RBA’s last rate setting meeting on November 4 when the cut was 0.75%.
They are again expected to leave the door wide open for further interest rate cuts.
Speeches by RBA Governor Glenn Stevens and Assistant Governor Edey will also be watched closely for clues about future interest rate moves.
A speech by Treasurer Wayne Swan will also be looked at closely in terms of the Government’s on going response to the financial and economic crisis.
Data for retail trade volumes in the September quarter are likely to show a small bounce after falls in the previous two quarters.
These will be the full seasonally adjusted figures. The less reliable adjustment showed a sharp 1.1% fall in September alone when released last week.
The ban on short selling non-financial shares in Australia will be removed on Wednesday.
Brewer, Lion Nathan is the major earnings result this week, along with AWB Ltd.
The AMP’s Dr Shane Oliver says that given that the share market has fallen 25% since the ban was imposed there is no reason to expect that its removal will see big falls in shares.
"In fact the resumption of short selling could help boost share market liquidity and reduce volatility.
"Overall, encouraging news will be in short supply once again," he said.
MONDAY:
ABS retail sales data for the September quarter. AGMs include OneSteel. Results: TechnologyOne. James Hardie interim results.
TUESDAY:
RBA releases the November 4 board meeting minutes. ABS international imports fig
