A local concentration for investors, at least at the start of the week because of the Reserve Bank interest rate meeting later today, but that doesn’t mean offshore events can be ignored, as Friday night’s surprisingly weak US jobs report showed.
Markets remain nervy and it’s for that reason investors have to be wary of major swings in sentiment – the volatility will unsettle investors and it will be hard to look through this to see if there are any positive trends.
In Australia the RBA is expected to leave interest rates on hold at its board meeting today because there’s no reason for a cut, at this stage, according to the AMP’s chief economist Dr Shane Oliver. Economists at Commonwealth Securities wrote at the weekend "….we don’t believe that the RBA will change its interest rate stability rhetoric – at least not this year".
On the data front we can expect another large trade deficit later and further weakness in investor housing finance on Friday after last week’s weaker than expected report on building approvals. New home sales are due for release tomorrow from the Housing industry Association.
In the US, the focus is likely to be on the minutes from the Fed’s last meeting on Thursday, our time, which will again underline the suggestion that the Fed still expects to raise interest rates later this year.
But that it will take account of the threat to US growth and inflation from global economic and financial developments which were also underlined by last week’s market volatility.
On the data front look for the August trade deficit for the US tonight, our time, (Tuesday) to show a deterioration.
The US Q3 earnings season starts on Thursday night, our time, with Alcoa (which last week announced a split in its structure) reporting.
Earnings at S&P 500 companies are expected to have dropped 4.8% from a year ago, while revenues are forecast to have dropped 1 %, according to S&P Capital IQ. Thomson Reuters has a similar forecast, but points out that the first round of estimates for the first and second quarters showed falls in revenue and earnings, but both quarters ended up with reasonable growth in both metrics.
In Asia, the Bank of Japan meets Wednesday but is unlikely to make any changes to monetary policy, even though there’s more and more evidence the economy has been slowing to stalling speed. Current account data for August is out in Japan tomorrow.
In Europe, the Bank of England releases its interest decision and minutes of the meeting – the belief that the Bank is on the cusp of lifting interest rates should be knocked on the head because of the slowing pace of global activity and signs the British economy is also weakening.
The IMF and World Bank hold their (northern) autumn meetings later this week in Lima, Peru. The Fund has cut its global forecasts for this year and next and looks likely to go lower again. The Fund publishes its World Economic Outlook tonight our time with new, lower forecasts and a much gloomier outlook for global activity.
IMF head Christine Lagarde and World Bank president Jim Yong Kim will hold press conferences on Thursday night, our time.
