Global focus this week will be on Thursday for a number of important decisions and releases.
First off it’s when we will know the results of the two-day meeting of the US Federal Reserve starting tonight in Washington and whether we see anything new about its determination to lift interest rates this year.
In Australia the major data release this week will be the jobs report for May which is out on Thursday, along with the unemployment rate.
The Bank of England meets Thursday night, our time, and is expected to make a statement about how it will handle markets around the time of the vote on Thursday week.
And the Bank of Japan also meets on Thursday and will be watched very closely to see if there is any further expansion of its quantitative easing policy.
The timing of the US rate rises saw bond yields around the world fall sharply last week as investors sought safety ahead of the Fed meeting, and next week’s more controversial vote in the UK on whether the country will leave the EU, a decision that is starting to look like it will happen.
In the US, the Fed is expected to leave interest rates on hold.
A combination of the potentially disruptive Brexit vote taking place next week, and the very weak May employment data has made a rate rise this month problematic. July or September seem to be the best bets, but that will depend on the comments after this week’s meeting.
The focus will be on the post-meeting statement, Chair Janet Yellen’s press conference, Fed economic forecasts and the so-called “dot plot” of Fed officials interest rate expectations over the next year or two.
AMP’s chief economist Dr Shane Oliver says, “While we expect the Fed to signal that it still sees two rate hikes this year the overall message is likely to remain that it will be cautious is raising rates given low inflation and the uncertainties around growth.
“Given a likely desire to see clear evidence that US activity indicators and jobs have picked up the Fed is more likely to wait till September before moving again,” he wrote at the weekend.
On the data front in the US, there’s the retail sales data for May out tonight, our time, industrial production also for May tomorrow night, our time, Wednesday CPI inflation (Thursday night, our time) and housing starts (Friday night our time).
In Australia it will be a quiet week with another solid NAB business conditions report later today, and business confidence, the Westpac/MI consumer sentiment index (for May tomorrow)
But the big release locally will be the May jobs data on Thursday. It will be the last major data release locally before the July 2 Federal poll.
Dr Oliver believes the figures are “likely to show a decent gain but watch the full time versus part-time mix which has been soft lately and higher participation may drive a slight rise in unemployment to 5.8%".
Locally in corporate news, retailer and supplier Metcash releases its full year results mid-week.
And in the US, attention will be shared between the Fed and Apple’s Worldwide Developers Conference which gets underway in San Francisco.
According to the Financial Times Apple "is expected to unveil the next phase of Siri’s evolution. The conference comes a week after Apple said it would offer more generous revenue-share terms for long-term subscriptions reducing the 30 per cent commission it has taken on sales at the app store.”
Tech giant, Oracle is one the few corporates to report earnings this week, along with supermarkets giant Kroger and drug store chain Rite Aid.
In the UK, Poundland, the “one pound” discount chain, reveals its latest results.
And next Saturday sees the release of the May house price data from China which will be watched to see if the improvement this year is continuing, especially the sharp increases in the past three months in some major cities.
And there is one decision that will have a major impact on markets, especially China’s. Tonight our time, global market benchmark provider, MSCI will announce its decision on whether to include Chinese mainland (or A) shares in its emerging market and world equity benchmarks.
A ‘yes’ it could cause a near term flurry of interest but Dr Oliver says that “given that any inclusion will be phased in over time, the short term impact may prove to be brief and marginal."
And the Bank of Japan on Thursday may now surprise the market with additional easing, particularly given that the Group of 7 meeting in late May is now out of the way.
