American data grabs our attention again this week with the all important Federal Reserve interest rate policy meeting dominating, plus a slew of reports on the health of the depressed housing sector.
The various reports have the capacity to either wreck the rebound in equities markets that’s developed in the past two weeks, or send markets higher if the reports are seen as being positive.
The US Federal Reserve will leave interest rates on hold yet again and could indicate that it will embark on more quantitative easing (QE) if conditions warrant it.
The Fed meets tomorrow night and releases its usual statement early Wednesday.
Economists say the Fed will again downgrade its forecasts for the US economy, especially for 2011, but this shouldn’t trigger a change in policy.
But they do caution there is an outside chance that it will embark on a new round of QE immediately.
A lot depends on the wording of the post-meeting statement.
No change in the statement from the previous meeting in early August could in fact push the stock market higher and see it break out of the tight trading range of the past four months.
In late August, Fed Chairman Ben Bernanke said he would need to see a significant deterioration in economic conditions before easing monetary conditions further.
That hasn’t happened and recent data on jobs, production, retail sales and inventories have been a little stronger than expected.
The recent Fed Beige Book survey said there was a "widespread deceleration" noted from many of the 12 reporting districts of the Fed across the US in July and August, but that was as much a catch up to what other, earlier data had been showing..
But deflationary fears were eased on Friday when producer and consumer inflation figures showed a small rise. But core price readings were still very weak.
It’s somehow fitting that this week sees a string of releases on the blighted housing sector that could help boost the spark of confidence about the US.
Much of the current gloom in the US has been caused by the slide in housing activity into deep depression since the ending of the tax credit.
From the housing market index on Monday to housing starts (and building permits) on Tuesday, followed by existing home sales on Thursday and new home sales on Friday, investors will be able to get a clearer picture of a key sector that must improve before the economic recovery can really happen.
US analysts say that after a string of rotten reports since April, when the extended housing tax boost expired, we could now start seeing a run of more positive reports with rises in sales and starts and improving confidence.
The AMP’s chief economist, Dr Shane Oliver says the August data for housing starts, permits to build new homes, house sales and a survey of home builders are likely to show signs of stabilisation after the slump caused by the ending of the first home buyers tax credit earlier this year but house prices are still likely to be under downwards pressure.
US home builder Lennar Corp reports its latest quarterly figures tonight and will add to the flow of information about housing.
Other reporters this week include retailer, Bed Bath & Beyond Inc. and sports goods group, Nike in what is a quiet week.
US durable goods orders are also released and will be watched to see if the recovery in capital spending is continuing.
In Australia, interest rates will be the focus with a speech today in Victoria by RBA Governor, Glenn Stevens and the release tomorrow of the minutes from the September RBA Board meeting.
A speech last week by the bank’s head of economists, Dr Phil Lowe made it clear that the focus was now squarely on inflation and the strains starting to appear in the economy as growth picks up.
Governor Glenn Stevens’ speech will be looked for clues on this topic and on the RBA’s tightening bias which is now very short term, given the wording of the post-board meeting statement.
That’s why the minutes will be important because they will help flesh out the change.
Dr Oliver points out that "given the strength in recent Australian and Chinese economic data we expect the Governor to adopt a hawkish stance."
Corporate reports will be dominated by retailers and the Soul Patts investment group.
David Jones’ full year results are out Wednesday and will be examined and compared to last week’s figures from Myer.
On Friday the first post-float figures will be released by adventure wear retailer, Kathmandu Holdings, which has already suggest they won’t meet forecasts in the prospectus.
And on Thursday first half results from linked companies, Brickworks Ltd and Washington H Soul Pattinson Ltd.
Tomorrow sees the release of the Australian Bureau of Agricultural and Resource Economics’ (ABARE) commodity forecasts for 20110-11 and final figures for the year to June.
This could be better than expected because of the good rains across much of eastern Australia in recent weeks and forecasts of higher grain exports in the coming year.
Cotton prices are at 15 year highs and wheat prices are much stronger than they were when the previous forecasts were issued in June.
Wednesday sees the release of the latest Westpac–Melbourne Institute Leading Index.
Meetings will come from groups including, Poseidon Nickel (EGM), Jupiter Energy (AGM) on Tuesday, while Alesco Corporation holds its AGM the next day, Astra Capital holds its AGM the day after, Saint Istvan Gold holds an extraordinary general meeting. Argent Mineral holds its
