Markets in Australia this week will be dominated by the reaction to the release yesterday of the Financial System Inquiry by David Murray, along with the November jobs data on Thursday, but for markets here and around the world, the really big news will be the monthly economic data from China.
The latest Chinese data will dominate all else seeing how it’s impinging on the economic thinking in every major western market – but none more than in Australia where the risks from the slowing Chinese housing sector is still the number one reason for the Reserve Bank to cut interest rates.
The reporting kicks off with the November trade data (including the import of iron ore and other commodities) later today.
Some economists think the November data is likely to show a slight slowing in export growth.
Consumer inflation out on Wednesday, is likely to remain low at 1.6% and producer price deflation is expected to intensify, all of which leaves plenty of room for further official interest rate cuts.
Bank lending and property sector data later in the week should show a pick-up in lending reflecting central bank easing, but flat to slightly softer momentum in fixed asset investment will confirm housing in particular remains weak.
Retail sales are expected to be weak, along with industrial production (all out Friday).
The AMP’s chief economist Dr Shane Oliver says as it’s a bit too early to see the impact of the Chinese central bank’s interest rate cuts and liquidity injections over the past month.
Weak figures from China (say a fall in exports or imports, or industrial production on Friday) will renew fears in Australia that the vital Chinese economy is slowing and will drag Australia lower just as the domestic economy is weakening — hence the concentration on the health of the Chinese property sector and wider economy by the Reserve Bank.
In Australia, the ANZ job ads survey for November is out later today and should show another small rise, as it has been doing for the past half year.
The monthly reports on business conditions and confidence from the National Australia Bank are out tomorrow, with the monthly survey of consumer confidence from Westpac on Wednesday. Both are expected to show little change in confidence or conditions.
The Australian Bureau of Statistics releases housing finance figures on Wednesday for October – nothing dramatic is expected, while and on Thursday another flat jobs report is expected – this time for November. Dr Oliver says the unemployment rate could rise to 6.3%.
There’s nothing much in the way of major corporate news this week – except market reaction to what the Murray report has to say about banks and insurance companies, and especially superannuation. These recommendations could change investor views of these sectors over time.
The Reserve Bank of New Zealand releases its latest interest rate decision on Thursday.
In the US, the oil price and sentiment towards the energy sector will again dominate the week.
So far as data is concerned, a small rise in October retail sales is seen by economists (out Thursday night our time) and a fall in producer prices (on Friday) thanks to lower energy prices.
The first major consumer sentiment survey for the month is out on Friday and is expected to be upbeat following the good news on November jobs and lower petrol prices.
There are only a handful of companies reporting this week, including Costco (and we should find out how the company is travelling in Australia), Lands End, Diamond Foods, Lululemon Athletica, Adobe and home builders Hovnanian and Toll Brothers.
In Europe the focus will be on how much bank interest there will be in the ECB’s second auction of cheap long term funding on Thursday night.
Dr Oliver says that with the stress tests out of the way, hopefully the banks will feel more confident in expanding their balance sheets.
The Eurozone also sees the release of industrial output numbers for October on Friday night, our time.
Production was down 0.4% in the third quarter as a whole and further disappointing data are expected for the fourth quarter.
Markit reckons that with its manufacturing survey data showing stagnating production last month and France, Italy and Germany all contracting, the official figures won’t make pleasant reading and will increase pressure on the European Central Bank’s to take further action to stimulate the region’s economy.
In Japan, September quarter GDP growth is likely to be revised up to -0.1% quarter on quarter from the -0.4% decline initially reported last month, thanks to stronger than expected September quarter business investment data which was out last week.
The latest current account figures for Japan will also be issued today (along with the new GDP estimate).
