A very short week in Australia – just three trading days for markets and business and one that will be easily dominated by the release of the March quarter consumer price index tomorrow.
Offshore the major data release will be the early reports on the health of manufacturing in China, the US and the eurozone. Otherwise it’s a fairly quiet week, as in Australia.
In Australia, despite some suggestions tomorrow’s CPI release in Australia will be of higher importance than usual, the reality is that it won’t – unless the quarterly figure is around 1% or more.
The Reserve Bank has already come to terms with the higher than forecast inflation in the last half of 2013, which it blamed on the fall in the value of the currency.
But the bank did confess to being puzzled by the speed of that transmission of higher prices through the economy, and wondered if conditions in the wider domestic economy might have been more stretched than it had thought.
Hence the fact that while the RBA will be watching the CPI data and examining it closely, the stockmarket won’t care.
It has already come to terms with the fact that the bank won’t be making any change to monetary policy for quite a while – as the central bank keeps telling us every month.
The March quarter CPI should be a bit lower than those for the September and December quarter.
For example, the AMP’s Dr Shane Oliver sees a quarterly rise of 0.6% for both the headline and underlying measures thanks to the seasonal increases in prices for health and education and higher petrol prices.
He reckons these are likely to be offset by price falls in clothing and footwear, household equipment and recreation.
A quarterly rise around this level will boost the annual rates of inflation to 3% for the headline reading, and 2.8% for the underlying, while high, we shouldn’t be worried.
Dr Oliver wrote at the weekend, “This reflects the elevated inflation readings in the previous two quarters and the RBA is already forecasting a rise to 3.25% for headline inflation and a rise to 3% for underlying inflation in the June quarter, so unless the inflation data is much worse than expected its unlikely to change the RBA’s stance on interest rates".
But a high rate will see the dollar rise back to 94 USc because traders in that market love a good story, even if it’s at odds with reality. For them the story will be ‘rate rise looms’, to the exclusion of reality.
For corporates it’s a quiet three days with only a handful of production reports to be released.
Later today, Oil Search will release its fourth-quarter production report, while tomorrow Newcrest will publish its third-quarter production report.
On Thursday Atlas Iron will post its March quarter production data and Resmed releases its third quarter results.
In the US, around 150 S&P 500 companies are scheduled to release quarterly results through to Friday, in an earnings season that has been so far mediocre, though nearly two-thirds of companies reporting have beaten (lowered) Wall Street estimates, according to Thomson Reuters.
That’s helping create the false sense of a strong start to thee March quarter earnings season.
Among the US companies reporting are McDonalds, Apple, AT&T, Boeing, Facebook, Amazon, Microsoft,General Motors, Qualcomm, Procter and Gamble, Yum Brands, and biotechs such as Gilead Sciences, Biogen Idex and Ilumina.
This trio has been among the big fallers in the recent shake out on Nasdaq and in its biotech sector.
On the economic front, there is housing data with existing home sales and house price data out tonight, our time, and new home sales Wednesday, and durable goods are reported on Thursday night, our time. There’s also the update of the US manufacturing index on Wednesday night, our time.
In Canada, the Bank of Canada releases its latest monetary policy decision and retail sales data will also be released.
In Asia the Chinese flash manufacturing survey from HSBC/Markit is expected to show a slight improvement when it’s released tomorrow.
The Japanese inflation data (out on Friday) is tipped to show a further slight increase for March.
And the Tokyo inflation data for April is expected to rise sharply on the back of the April 1 sales tax hike from 5% to 8%.
In Europe, the Eurozone PMI is likely to show further gains when released on Wednesday night.
The Bank of England releases minutes from its latest meeting and industrial trends data are also issued in the UK and retail sales figures are released alongside data on mortgage approvals.
