Once more the coming week will resemble the preceding couple of weeks for financial markets.
The issues are familiar, with only the emphasis changed in some cases.
They include the ongoing brawl over Europe, Greece, and EU banks; US earnings and US economic growth; Australian inflation, Australian interest rates and our annual meeting season; and whether the Chinese economy is slowing or sliding.
Greece and the question of recapitalising EU banks and other issues won’t be resolved until Wednesday, hopefully, but an awful lot can happen between now and then to upset the world economy.
First up, central banks in Canada, India, New Zealand and Japan are all expected to leave monetary policy on hold at meetings this week.
That’s despite another rate cut by Brazil late last week, the second in a month.
Thailand’s central bank left rates steady last week, despite the terrible floods in and around Bangkok which have cut exports and seem sure to impact the economy (as the Queensland floods did in Australia earlier in the year).
For us in Australia, inflation and interest rates will dominate the week with the release of the September quarter’s Consumer Price Index on Wednesday after Producer Price Indexes are released later today.
Comsec economists say a CPI of 0.6% or less will raise the changes of a rate cut when the Reserve Bank board meets tomorrow week, while a reading of 0.9% or more will make a rate cut very hard to sustain for the central bank.
The AMP’ chief economist, Dr Shane Oliver says his group expects "headline inflation to rise 0.6% taking the annual rate to 3.5%, but see underlying inflation rising by 0.5% which would leave the annual rate calculated on the basis of revised ABS weights and seasonal analysis sitting comfortably just below the middle of the inflation target.
"We would see a 0.5% rise or less in underlying inflation as paving the way for a rate cut given the deterioration in the global outlook and the softness in domestic demand. "
And Westpac’s Bill Evans said in commentary at the weekend: "We expect a print of 0.6 per cent for the quarter for the average underlying core measure, taking annual core inflation to 2.6 per cent for the year."
He said that would enable the bank to cut rates at next week’s meeting, or, more likely, at the December meeting.
The events in Europe this week will help the RBA: a believable resolution and plan to handle the current and future problems will give the central bank a bit more time to assess the situation.
More disagreement between the EU and eurozone members this week and real lasting agreement, could spark a slump in markets and force the RBA’s hand next week.
For those reasons, comments from RBA Deputy Governor Ric Battellino (who speaks in Sydney tomorrow) will be closely watched by the market for an update on the central bank’s thinking.
The first major bank profit report will be issued on Thursday with the NAB reporting its 2010-11 full year figures, followed by Macquarie Group releasing its interim data on Friday.
Macquarie’s figures will be examined very closely to see if it has been hit hard by the loss of trading volumes and revenues in some areas of the markets, as the likes of Morgan Stanley and Goldman Sachs have reported in the past week or so.
Macquarie has already warned that the first quarter would be down on a year ago.
The NAB is expected to report higher earnings and dividend, and perhaps more on what is happening with its UK banks.
Analysts think the bank will earn around $5.6 billion, a record and up 22% on the 2010 result.
Woolworths reports first quarter sales on Thursday, the AMP releases a third quarter trading update and the Ten Network releases its full year profit (August 31 balance date) all on the same day.
Quarterly trading updates are also expected from Austar and GPT.
Macarthur Coal releases its first quarter production report on Thursday which is likely to be its last as an independent company with Peabody/Arcelor Mittal’s bid to win control with their takeover bid.
The AGM season continues, with the Harvey Norman AGM on Thursday to be watched for comments on trading conditions.
Super Retail Group’s AGM on Wednesday will no doubt see discussion of the company’s planned acquisition of the Rebel sports chain of store for $610 million.
Other leading companies holding meetings include Origin Energy, Bendigo Bank, Foster’s Group, Insurance Australia Group, Newcrest Mining and Qantas Airways on Friday which could become heated given the bitterness of the industrial dispute damaging the airline’s operations.
Billabong International holds its AGM, as do Stockland, Waratah Gold, Transurban, Pacific Brands, Argo Investments, Southern Cross Media, Treasury Wine Estates, WorelyParsons, Group, Tabcorp Holdings, NIB Holdings, Carsales.com.au and Toll Holdings, Flight Centre, Blackmores, Tatts Group, AGL Energy, Platinum Capital, Karoon Gas Aust, Royal Wolf Holdings, Ardent Leisure, GWA, UGL, Consolidated Media Holdings, Crown, Boom Logistics and Suncorp Group.
And the Commonwealth Heads of Government meeting starts in Perth later in the week.
In the US, the first estimate of September quarter GDP is due out in the US on Thursday night, our time.
Optimistically, analysts and economists are seeing the figure in the range of 2.1% to 3.0% (Credit Suisse) with consensus at 2.3% (all annual rates of growth).
Solid gains in consumption and trade (with the surge in car sal
