What to watch in the week ahead?
In Australia, the most important statistics will be the June quarter private business investment data on Thursday that will be watched closely to see how business investment is travelling.
The AMP’s Dr Shane Oliver says the figures will probably show that while June quarter business investment contracted, investment plans may also show signs of stabilization after recent cutbacks, thanks to the improvement in business confidence.
The Reserve Bank has suggested recently that although investment is falling, there are signs some companies are reassessing previous decisions to scrap or delay expansion projects. And there’s the stimulus spending to come in infrastructure.
"Overall, business investment was expected to fall significantly as a share of GDP over 2009 and 2010, but it would still remain quite high by historical standards.
"Partly offsetting this weakness, there was likely to be a pick-up in public investment spending, with the public building approvals data for June showing a very large increase, as the Australian Government initiatives on education spending began to take effect," the bank said in its minutes for this month’s board meeting.
The private business investment figures will be an important data release in the lead up to the second quarter growth figures the following week.
They will be released on Thursday. The day before Construction Work Done data for the June quarter will be released and should be weak.
As well, new homes sales data from the Housing industry Association will also be released, while car sales figures for July are likely to be lower after the ending of some investment tax benefits in June.
The Australian profit reporting season will continue with over 60 major companies due to report, (See above story).
In the US figures for house prices, consumer confidence, new home sales and durable goods orders are all due for release along with revised June quarter GDP data.
Of these, consumer confidence will be watched most closely to see whether recent weakness has been sustained or whether the better news on the labour market as contributed to an improvement in confidence.
The second reading on US growth will be watched with great interest given the positive comments Friday by Fed Chairman, Ben Bernanke, about the US economy.
The first estimate showed the economy was still contracting, but at the better rate of 1% annual, compared to more than 6% for the first quarter.
Thomson Reuters reckons that weak consumer spending figures for June will push the annual contraction to 1.4% in the second estimate.
On Friday, Wall Street got more confirmation that the economy is on the mend with a report showing existing home sales in July rose 7.2% — the fastest pace in nearly two years and a sign that housing is pulling out of a three-year slump.
The figures, plus stronger-than-expected second-quarter earnings and then higher oil prices, pushed the Standard & Poor’s 500 and the Nasdaq to their highest levels since last October.
That means new home sales figures for July, due next Wednesday, will get more scrutiny than usual from investors who want proof that the rally has more substance than just optimism (But not, it seems among US consumers).
As well Tuesday’s single-family home prices for June, due from the Standard & Poor’s/Case-Shiller home price index on Tuesday.
They are forecast to show a small rise of 0.2% for June, which would confirm May’s surprising turnaround.
Other major indicators will be durable goods orders, personal income and consumption stats.
They could very well play a bigger role in shaping the market as more investors are starting to question the sustainability of the recovery without strong consumer activity, and consumer sentiment.
Quarterly earnings from luxury jeweller Tiffany & Co are out this week and will show if the rebound has extended to the top end of retailing now that money is flowing again on Wall Street.
Just a handful of S&P 500 companies remain to report. They include the ultra-cheap retailers, Big Lots and Dollar Tree Stores and office supplies store Staples and clothing retailer, American Eagle.
