Where to turn for guidance when there are going to be so many major factors impacting markets and investors this week?
There’s an Australian interest rate decision, a local jobs report for April, plus the latest bank profits, early Chinese economic data for last month, the UK general election, the meeting of the European Central Bank and the vital US jobs report for April.
All this makes the week ahead one of the most important this year for financial markets here and offshore, especially with markets looking for direction and worried about earnings, the health of the US economy and the timing of the Fed’s move on interest rates.
In Australia the week ahead includes the rare combination of an RBA meeting and a jobs report all in the same week, plus those bank profit reports – all of which will influence sentiment in markets about shares, bonds and the value of the dollar.
Tomorrow, many analysts think the Reserve Bank will cut the cash rate to 2% (from 2.25%), but it’s another very close call.
The RBA could also do nothing but signal a rate cut next month – after the Federal budget is delivered.
The RBA remains worried about the housing boom, especially in Sydney. Continuing house price rises in Sydney and the bounce in the iron ore price (and other commodities, such as oil) over the last few weeks has eased the pressure on the RBA cut – although iron ore prices now seem to be sliding back.
The RBA board meeting tomorrow will consider the new economic forecasts that will appear in the second Statement on Monetary Policy (to be released this Friday).
These are likely to contain further downgrades to the growth outlook, mainly in response to the softening outlook for business investment.
And then there’s the April jobs report on Thursday, another vital bit of data – this time an early report on the start of the second quarter.
The AMP’s chief economist Dr Shane Oliver sees flat employment for April “after two very strong months which should see the unemployment rate rise to 6.2%". Others see a small rise in new jobs and the jobless rate remaining at 6.1%.
Elsewhere on the data front in Australia, expect to see a small gain in March building approvals (out later today), a slight improvement in the March trade deficit tomorrow), and a small gain in March retail sales, but solid real retail sales growth for the March quarter (on Wednesday).
Interim bank profits are expected from the Westpac (this morning), ANZ tomorrow, the CBA (third quarter update) on Wednesday, the NAB on Thursday and Macquarie (a final on Friday).
Later today the final details of the refloat of MYOB will be revealed.
And on Wednesday Woolworths holds an investor day at which it is expected to reveal a new sales strategy to fight back against Coles’ current dominance in supermarket pricing, as well an update on the performance of the struggling Masters hardware business is expected, along with third quarter sales.
In the US, April’s payroll and employment reports on Friday night, our time, should show a better result than the surprisingly weak March report.
Economists expect a gain of 225,000 new jobs after the weather depressed result for March.
Unemployment is expected to fall slightly to 5.4% (from 5.5%) and hourly wages growth is expected to remain just above 2% year on year, according to the AMP’s Dr Oliver.
And the April survey of non-manufacturing conditions is expected to remain solid and the trade balance (for March) is expected to be a bit weaker than in the previous month. Both are out Tuesday night, our time.
The March quarter profit season continues in the US (and offshore). More than 80 companies in the S&P 500 are down to report – it will be the final big week of reports.
The list this week includes Lowes, Home Depot, Mylan, Kellog, Comcast Disney, News Corp, 21st Century Fox, CBS, Discovery, Liberty Global, Liberty Media, Whole Foods, Priceline, Monster Beverage, Monster Worldwide, Fossil, Motorola Solutions, Electronic Arts, Archer Daniels Midland. Transocean, Tesla Motors, Allstate, Metlife and Molson Coors.
Elsewhere reports are expected from Acer, Adidas, BMW, Siemens, Zurich Insurance, Wilmar International, Arcelormittal, Adecco, Munich Re, GSK, AnheuserBusch, Lufthansa, Brother, Denison Mines, BG Group, Hugo Boss, Toyota, Mitsui and Co, Olympus and Marubeni.
In Europe, the UK election this Thursday night, our time, may well see the David Cameron-led Government being replaced by a Labour-led coalition, or the Conservatives could be re-elected as the biggest party, but with a shortage of coalition partners.
If Labour is elected (and goes into coalition with the Scottish Nationalist Party (which is expected to be the big winners from the polls) it could head off a referendum on the UK’s membership of the European Union, and possible exit .
Greece still remains an issue with a 200 million euro payment due to the IMF on Wednesday night, our time. So more doubt and drama for markets to focus on.
In China, April data starts flowing later in the week. On Friday the trade data for April will be released and economists are looking for export growth to bounce back after that 15% fall over the year to March that looks to have been related to the Chinese New Year holiday related distortion.
April data released on Saturday is expected to show CPI inflation remaining low and producer prices still deflating for manufacturers and others.
But before all that, later today the HSBC/Markit final survey of Chinese manufacturing will be released (and similar reports for Japan and many other economies in Asia and Europe, especially the eurozone). The official report for April, released on Friday, showed a reading of just 50.1 – barely in expansion and lower than in March.
