America dominates the week with some significant bits of economic data to be released.
These include inflation, industrial production and new home starts and retail sales.
The major event of the week is the US Federal Reserve’s final interest rate and monetary policy meeting which will be held tomorrow night, our time.
The one-day meeting isn’t expected to do anything major.
The second round of quantitative easing, which started last month is continuing; the economy seems to be on the improve in some areas, there’s the mooted tax cuts from the Obama agreement last week (which remains in some doubt), but market interest rates continue to rise sharply on expectations of higher growth and inflation.
Given the generally positive flow of data in the past few weeks (excluding the poor jobs report for November), analysts will be looking closely at the central bank’s post-meeting statement for any change in the way the current state of the economy is described by the Fed.
While it is likely to acknowledge an improvement in recent economic data it won’t be enough to alter the most recent assessment that interest rates will likely need to stay near zero for an extended period and that it will need to complete the second round of quantitative easing.
As well, inflation (producer and consumer) figures for November are due on Wednesday, retail sales on Tuesday, and housing starts and permits on Thursday.
Data on industrial production for November is also out on Wednesday and is expected to show a small improvement.
Inflation is expected to remain weak, a small rise in new house starts and permits is expected and retail sales will be up a bit (judging from post-Thanksgiving commentary from a number of retailers).
Surveys of homebuilders and manufacturers in the Philadelphia and New York regions are also due for release.
The tax cut agreement is expected to be approved by the US Senate on Tuesday, but could face a tougher road to passage in the House where President Obama has appointed former President Bill Clinton to get it over the line by the end of the year.
If the legislation stalls, resulting in higher capital gains and dividend taxes at the start of next year, then US share markets will fall.
(But will bonds rally with yields falling after the big sell-off last week?)
In Australia, the big event will be the Senate banking inquiry which starts today in Sydney with RBA Governor Glenn Stevens the star witness.
This inquiry will generate quite a few headlines this week, especially with three of the big four banks (Westpac, NAB and the ANZ) holding their 2010 AGMs.
Yesterday’s bank reform package from the federal government was leaked last week to the Canberra media.
It will generate some publicity today and is designed to try and influence the start of the bank inquiry.
Tomorrow sees a fuller picture of the state of the winter grain harvest issued by ABARE, the government’s commodities forecaster.
The estimates will take into account more information from grain growing regions of the damage caused by the near record rainfall in the past months or so.
Estimates of the impact on production, imports and prices will also be issued.
The NAB business and confidence survey is out tomorrow and Westpac’s consumer confidence survey is out Wednesday.
Both will be watched closely as a guide to how long the current soft patch in the economy will last.
The AMP’s chief economist Dr Shane Oliver says that, "Given interest rates were left on hold this month and the good news on the labour market it’s possible that consumer confidence will recover some of the fall posted in November".
Housing starts data for the September quarter are out tomorrow and is likely to show weakness reflecting earlier falls in building approvals, and data for lending finance, car sales, skilled vacancies and imports will also be released.
Besides Mr Stevens’ appearance at the banking inquiry, Assistant Governor Guy Debelle speaks in Sydney midweek at a banking conference.
Back offshore UK house price data for November as well as the November consumer price index retail price index are due for release.
UK and European Union (EU) industrial production data for October is also due out.
In the UK on Wednesday, jobless and benefits claims data for November are due for release, as well as EU unemployment figures for the eurozone and the EU as a whole.
Retail sales figures for November are due in the UK on Thursday, while the EU consumer price index for November is also due.
Corporate results in Europe include the latest figures from Spanish retailer Inditex and an update from struggling UK pub group Punch Tavern.
One development to watch is a vote of confidence tomorrow night, our time, in the Italian Parliament that could see Prime Minister Berlusconi lose and forced to resign.
That would see either a new government appointed by the President, or fresh elections called for next year.
And any instability will impact the still already unsteady bond markets where Italy is in the queue of countries most likely to come under pressure because of its high debt burden.
In Japan, the Tankan business survey for the December quarter (due out Wednesday) is likely to show a further weakening in Japanese business conditions.
That will be despite last week’s improved second estimate for third quarter economic growth which saw the rate raised to an annual 4.5% (1.1% quar
