There’s another big week ahead of us with inflation in Australia and the US, GDP in China and the UK and the third quarter earnings season in full swing – not to mention the febrile state of markets.
As well the Reserve Bank executives make a number of speeches and the bank makes a key releases this week, all of which could have local impact.
Of these factors, the Chinese GDP and other economic figures tomorrow have the capacity to change sentiment in world markets.
In fact the health of the Chinese economy will be week-long puzzle after the country’s central bank signalled another cash injection into a handful of big banks (the second in a month), late last week.
Iron ore prices are back on the wobble, so that also could impact local sentiment – BHP Billiton’s first quarter production report this week will play into that continuing story.
But in Australia is the release of the Consumer Price Index for the September quarter on Wednesday that will be the dominant bit of local news.
It is likely to be down sharply, thanks to falling vegetable and petrol prices, not to mention a dip in electricity prices which the National Australia Bank reckons will knock 0.1% from the CPI in something of a surprise.
The best estimate is a quarterly rise of around 0.4% and an annual rate of 2.2%, well inside the RBA’s 2% to 3% target “over time”.
As well, there’s the release tomorrow of the minutes of the Reserve Bank’s October meeting a fortnight ago and speeches from RBA Governor Glenn Stevens on Thursday, Deputy Governor Phil Lowe tomorrow and the bank’s head of economics, Chris Kent in Adelaide this morning.
The CPI is the only statistics of note out this week, while in the corporate area, the annual meeting season steps up in pace.
Meetings this week will be dominated on Friday by the Qantas AGM and discussion of its huge losses. Other major companies reporting include AGL Energy, Amcor, Suncorp, Toll, Fletcher Building, Southern Cross Media, Blackmores, SAI Global, Bradken, Super Retail Group, Sirtex and Skilled Group.
Resmed releases its third quarter figures late this week.
BHP’s September quarter production report will dominate the back end of the flow of quarterly reports from mining companies.
China will dominate offfshore data releases week which will have the capacity to either undermine or boost market confidence.
Chinese economic activity data for September tomorrow is expected to show a small rise in industrial production to 7.5% year on year, from 6.9% in August, but there will also be a weakening momentum in releases on retail sales and fixed asset investment.
The big release will be the third quarter GDP number – forecasts are for annual growth of 7% to 7.4%.
The stronger exports in the quarter and weaker imports will have helped support GDP growth but not enough to prevent a further slight slowing.
On Thursday, the HSBC/Markit ‘flash’ manufacturing PMI for October is likely to have remained around 50, suggesting relatively stable, but not too convincing growth.
And Japan releases its trade account details on Wednesday.
In the US, September consumer price inflation data (out Wednesday night, our time) will be weak and show a fall to an annual rate of 1.6% or less (from 1.7%), thanks to falling energy and petrol prices.
Existing home sales (out Tuesday night, our time) and house prices (Thursday night ) are expected to show modest gains, but new home sales (Friday night) may show a reversal of some of the 18% gain seen in August.
Markit’s manufacturing conditions PMI (Thursday night, our time) is expected to have remained strong at around 57.5, which will encourage markets.
And the US third quarter earnings season picks up pace in the coming week. Forty companies deliver results on Monday including Apple, Chipotle Mexican, IBM, Halliburton and Peabody Energy. On Tuesday, 118 companies will report including E*Trade, Coca-Cola, Boeing, Lockheed Martin, McDonalds, Harley Davidson and Yahoo!.
Thursday is the busiest day in the reporting calendar with 263 listed companies slated to issue profit results including Amazon, Caterpillar, General Motors, 3M and Microsoft. And on Friday, 73 companies are slated to issue results including Procter & Gamble, United Parcel Service and Wynn Resorts.
Giant telcos AT&T and Verizon are due to report, as well as TV giant CBS and the huge cable and TV group Comcast (which owns Universal and NBC and is trying to buy Time Warner Cable). Dow Chemicals is also down to report.
It will be a huge week in fact. Apple is the key to sentiment. If it reports a surge in iPhone 6 sales, as markets expect, then we could see a rally in tech stocks, especially if there are any early figures from China where the new phone went on sales late last week.
Offshore a number of leading European and Asian companies will report – Tesco, the struggling UK retailer, releases its delayed results and other news on Thursday night. Credit Suisse, the big Swiss Bank, is also due to release its figures, along with Hyundai Motor, Kia, Volvo, China Shenhua, Nomura, Swedish Match, Posco (the huge South Korean steelmaker) and Norsk Hydro.
In the Eurozone, Markit’s business conditions surveys are expected to remain down on the highs seen in July and again raise concerns about a loss of momentum in growth.
The main focus though will likely be on the October 26 release of the ECB’s much anticipated bank Asset Quality Review and Stress Tests.
This will assess the adequacy of 130 Eurozone banks’ capital levels against both baseline and adverse scenarios and those that fail will be given 6 to 9 months to boost their capital ratios.
The AMP’s Dr Shane Oliver says, "Some failures are possible but mainly for unlisted and mutual banks, but not many of the major listed banks are likely to fail given pre-emptive capital raisings (€75bn since 2013) and conservative lending practices in the lead up to this review.
“In fact, just as occurred with the Fed’s stress test of US banks in 2009 it could prove to be a watershed event that helps restore confidence in Eurozone banks and clears the way for more bank lending,” he wrote at the weekend.
As well we get industrial orders for Italy (which will be poor), current account data for the eurozone as a whole, producer prices for Germany and on Friday the first estimate for UK third quarter GDP will be issued.
