Although the economy here and overseas is still the major story for investors, even that will be overshadowed this week by Barack Obama’s inauguration as the 44th US President.
From an economic point of view his administration will be looked to for leadership in stabilising both the US economy and the again shaky banking system.
Obama and his team have the potential to provide a boost to confidence in the US after the eight years of the two Bush administrations and their two recessions and two 50% or so bear markets for shares (and this time every other asset class).
What the rest of the world wants to see is a more vigorous and consistent approach to dealing with the current financial and economic crisis, with a defined stimulus package for the economy and a credible and consistent plan to steady the banks and through them the rest of the economy (especially the property, retailing and manufacturing sectors where demand, output and profits are vanishing and job losses escalating).
The Democrats have revealed a $US825 billion two year stimulus and tax cut package and there’s talk of more action this week to reveal a new approach to the struggling financial sector.
Anything would be better than the ad hoc, half-hearted approach seen under the Bush administration.
Meanwhile figures for US housing starts and permits, house prices and a survey of home builders will be released.
They won’t be good and will underline the extent of part of the problem for the Obama team.
December quarter US profit results will also start to flow in earnest and are likely to make bleak reading – poor profit results are likely already factored into share prices but the focus is likely to be on the outlook statements that companies provide and these are likely to be pretty cautious.
At the end of 2008 US analysts were forecasting (incredibly) a 1.4% rise in 4th quarter earnings: that is now a fall of 20% and more. \
That would make six quarters in a row of falling earnings among most major US companies.
Earnings this week will come from major companies such as IBM, United Technologies, Microsoft, General Electric, Google and Apple.
US Markets will be closed tonight (our time) for the Martin Luther King Day holiday.
Of interest to us in Australia will be the flow of Chinese economic figures.
December quarter GDP data is likely to show a further slump in growth down to around 6%, from 9% over the year to the September quarter.
Forecasts for this year are for growth of 6%, perhaps a bit more, perhaps a bit less.
This may well come with, or be followed by, the announcement of further fiscal stimulus and another interest rate cut.
Chinese data for December inflation, retail sales and fixed asset investment will also be released.
After last week’s figures showing a small dip in exports in December, some analysts are now saying that China needs more, direct spending from the government because domestic demand remains depressed.
Here figures for consumer confidence will be watched closely to see whether the recovery in confidence over the past few months has continued or whether the bleak global economic news has driven another setback.
We will also see Australian Bureau of Statistics figures on lending finance, new car sales for December and 2008 and import and export price index figures on Friday for the December quarter, ahead of next week’s Consumer Price Index for the December quarter and calendar 2008.
