No let up this week with investors confronted by decisions and data on oil prices, interest rates, economic growth, Trumps’ tax policy, inflation, as well as business investment and building approvals here in Australia.
Thursday and Friday also sees the release of the state of month surveys of manufacturing around the world, with, as usual, the surveys for China, the eurozone and the US to be most closely watched.
The second reading of US 3rd quarter GDP is out midweek, while new readings will be out for September quarter GDP for Italy, France, South Korea, India, Spain and Brazil.
In Australia, focus will be on September quarter business investment data (out Thursday) which will provide an input in GDP estimates and a guide to the investment outlook. Remember that it only captures around half to 60% of all business investment and misses much of the services sector, especially healthcare and education.
The business investment survey results come ahead of the third quarter National Accounts and GDP a week Wednesday.
The AMP’s chief economist, Dr Shane Oliver says we "can expect a slight gain in business investment reflecting stronger non-residential building and a slight upgrade to the outlook for non-mining investment plans."
He says we can also expect continued moderate growth in business and consumer credit in October from the Reserve Bank on Thursday as well as a 2.5% fall in building approvals and CoreLogic data for November to show a further slowing in national home price growth on Friday (with further falls in prices in Sydney).
There are a handful of corporate results this week – supermarket and hardware retailer, Metcash tomorrow, fast food chain Collins Food on Wednesday and poker machine group, Aristocrat leisure is due out on Thursday.
In the US, the focus is likely to be a Senate vote on its tax reform bill. It could come anytime from tomorrow onwards.
The GOP has 52 senators out of 100 so can only afford to lose two senators and still pass the bill with the Vice President’s casting vote. The AMP’s Dr Oliver says “After more tweaks around contentious issues, we think it will pass – but it will clearly be close.”
Others are not so sure. The vote will be decided by three Republican senators – Bob Corker, Jeff Flake and John McCain – all of whom are retiring, all of whom are fiscal conservatives and all of whom have fallen out badly with President Trump.
As well there’s the usual end of the month/start of the month data drop which could point to a slight lift inflation and continuing strength in business conditions.
Thursday sees the release of the Fed’s preferred inflation measure, the core private consumption deflator. Dr Oliver says it is likely to show a slight lift in inflation to 1.4% year on year, which will be yet another monthly reading below the Fed’s 2% inflation target.
It is getting towards five and a half years since that target was exceeded by core inflation readings.
On Friday the manufacturing conditions index is likely to show that US business conditions remain robust with a reading around 58.4.
In other data there’s new home sales (tonight, our time), home prices and consumer confidence (both due Tuesday), pending home sales and the second reading of September quarter GDP growth (which Dr Oliver sees being lifted to 3.2%. Both are out both Wednesday, US time).
As well as the Fed’s preferred inflation measure, the release will also contain details of consumer spending in October.
The Fed’s Beige Book of anecdotal evidence for its December meeting will also be released and Fed Chair Janet Yellen will make her last appearance before US Congress that will no doubt be watched for any clues on US interest rates (both Wednesday).
Several other voting members of the monetary policy setting Federal Open Market Committee, including outgoing New York Fed president William Dudley, Dallas Fed president Robert Kaplan and Minneapolis Fed president Neel Kashkari are also due to deliver speeches this week.
And Trump’s nominee for Fed chair, Jerome Powell’s confirmation hearing starts in the US Senate on Tuesday night, our time. He is already a Fed member, but his views on inflation and wages growth will be watched closely, as well as any comments on the path of interest rates next year.
In the Eurozone, expect unemployment for October to fall to 8.8% and core inflation for November to rise to 1% year on year (both Thursday), according to forecasts from economists.
In the UK, the results of the Bank of England’s annual stress tests for UK banks will be issued tomorrow night, our time as part of the central bank’s financial stability review.
In Asia, Japan’s industrial production on Thursday should bounce back, and Dr Oliver sees the usual end of month data on Friday to show a modest rise in household spending, a slight improvement in household spending and a slight rise in core inflation to 0.3% year on year.
Chinese manufacturing conditions PMIs (due Thursday and Friday) are likely to remain solid at around 51-52 and the non-manufacturing conditions activity survey is expected to remain around 54, according to Dr Oliver.
OPEC’s meeting on Thursday night, our time will be watched closely with an extension in production cuts beyond their current expiry of March next year likely to be announced. If not expect a sharp fall back in oil prices which have partly run up in anticipation (see separate story).
