Its a busy week here and offshore with economic data and central bank decisions, plus the start of US March quarter earnings season. But only one event will matter for local markets – today’s Reserve Bank board meeting and post meeting statement from Governor Glenn Stevens at 2.30pm.
Australian markets and most economists and analysts expect the RBA to cut the cash rate by 0.25% taking it to a record low of 2%.
But the decision could go either way, and if the bank waits it will be due to caution about the impact of a rate cut on the hot Sydney property market.
The May board meeting of the bank will be held after the March quarter inflation data is released and some economists say this could be another reason for RBA caution – but the bank isn’t worried about inflation which it sees as not being a concern for the next one to two years.
A bigger concern is the 22% drop in world iron ore prices in the past month and the refusal of the Aussie dollar to follow those prices lower.
As well, Rio Tinto last week cut contracted steaming coal prices into the Japanese market by 17% for the year to March 31, 2016. That will add to the downward pressure in our terms of trade.
The AMP’s Chief Economist Dr Shane Oliver points out that “outside of Sydney, property markets are losing momentum and in some cases quite week so isolated strength in the Sydney property market should really be dealt with by APRA and is not an argument to deny the overall economy lower interest rates.
"The RBA needs to set interest rates for the “average” of the economy, not just one city. And so on balance we expect the RBA to cut rates again on Tuesday,” Dr Oliver wrote at the weekend.
The data front retail sales figures for February are out later today, as is housing finance for the same month on Friday and ANZ job ads for last month. As well, industry car sales figures will be out this week.
In the US, the focus will be on the start of the March quarter profit reporting season which is kicked off by Alcoa on Wednesday night, our time.
A few other companies with January and February balance dates also are down to report, such as grog group Constellation, plus retailers Bed Bath and Beyond, Walgreen Boots and Family Dollar. In Japan, Fast Retailing (which owns the huge Uniqlo clothing chain around the world) is due to report this week.
Wednesday night also sees the release of the minutes from the last Fed meeting where it emerged the Fed had changed its view on the future path of US interest rates – a view that is likely to have been reinforced by last Friday night’s weak jobs report for March.
The 126,000 jobs created last month was well under forecasts of around 250,000 and has raised the prospect of the US Fed delaying its rate rise process until much later this year.
Wednesday also sees the release of consumer credit data for February from the Fed.
In the Eurozone the main focus will be on whether Greece gets new funding released in time to cover debt payments it needs to make.
That deadline is on April 9 (Thursday) and there are discussions between Greece and the EU set down for Wednesday – nothing like a deadline to concentrate everyone’s minds.
Service sector surveys for the eurozone (and other economies) are out tonight, our time.
The important monthly industrial orders data from Germany will be out tomorrow night, our time, while Thursday sees the release of trade and industrial production figures as well, so a big week for the German economy.
In the UK the Bank of England will announce its latest monetary policy decision on Thursday night, our time, but don’t expect any change ahead of the May 7 election.
Other data is likely to confirm the UK economy remains solid, with growth continuing into 2015 at around the same pace it ended 2014.
In Asia Chinese inflation data for March will be released on Friday and is likely to show another month of no price pressures. Importantly, the producer price index will have shown little or no change from the intensifying deflation of the past three years.
The Indian central bank and the Bank of Japan announce their latest interest rate decisions. No change for the latter, even though the economy is sluggish and deflation has almost returned. India could see a rate cut, according to some forecasts, but most see the central bank sitting pat.
Japan’s current account numbers for February will be updated tomorrow.
