US jobs, start of month data and a string of central banks meetings will dominate markets this week, as will the results of the Italian election, the announcement of whether there will be a coalition government in Germany and more details on President trump’s tariff tantrum.
China’s People’s Congress starts today with president xi likely to flex his powers and emerge as President for life.
Europe was back in focus yesterday with the outcome of the vote by Germany’s Social Democratic Party (SPD) members on the coalition agreement with Angela Merkel and the Italian elections.
The results of the Italian elections won’t be known until after 9am today. Polls close at 11pm Sunday, Italian time.
And German’s SPD announced with Chancellor Angela Merkel set to remain Chancellor for a 4th term on top of her existing term of 12 years.
Members of the opposition Social Democrats voted in favour of another grand coalition with Ms Merkel’s CDU (Christian Democrats). The vote by 460,000 SPD rank-and-file members had ended five months of political deadlock since September’s election.
As well there;’s the central bank meetings in Japan, Canada, Australia and Europe which will reveal monetary policy decisions – economists say none will see a rate move, even Canada which has been hiking rates as the US Fed lifts it key rates.
The European Central Bank’s March meeting is not expected to result in any changes to interest rates or its asset buying programme. The RBA will sit and look at the Australian economy, as will the Bank of Japan.
The global focus though will be on Friday and the February jobs report, wages data and unemployment report.
In the US, the focus will be on Friday’s February jobs report and specifically whether there is a further pick up in wages growth like we saw in the January report and which kicked off a plunge in share markets.
Forecasts range from 180,000 to 205,000 new jobs with a fall in unemployment to 4% and wages growth unchanged at its January level of 2.9% year on year. Some economists wouldn’t be surprised to see wages growth slow to 2.6%.
Wages were lifted in January by bonuses handed out following the US tax overhaul last year. the question is whether these bonuses continued into February.
In other data the February non-manufacturing conditions survey results (for services), is out tonight, while the trade balance and the Fed’s Beige Book of anecdotal evidence (both on Wednesday) will be watched for ongoing signs of building inflation pressure.
In Europe the ECB (on Thursday) will remain on hold, basically staying on auto pilot for now.
The ECB will be watched for signs of a taper in its quantitative easing program after September, but is likely to reiterate that rate hikes won’t occur until well after QE has ended which probably means around mid-2019.
In China, besides President Xi’s new title the thing to watch in the National People’s Congress starting today is the balance between growth and reform particularly around financial deleveraging.
The 2018 growth target is expected to be around 6.5%, but if its looks like the focus is shifting more towards reform and financial deleveraging implying a greater tolerance for weaker growth then this could raise concerns about China’s growth outlook.
Chinese trade data on Thursday and inflation on Friday will be influenced by the Lunar New Year holiday.
The Bank of Japan on Friday will reiterate that it has no plans to start winding back its ultra-easy monetary policy.
In Australia, the RBA tomorrow will leave rates on hold for the 19th month in a row. There’s no need for a change with solid business conditions and jobs growth, but offset by weak wages growth and below target inflation, risks around the outlook for consumer spending and the still too high $A.
RBA Governor Lowe speaks the day after the RBA meeting on Wednesday and will reinforce the impression that the RBA is comfortably on hold for now
On data front in Australia, December quarter GDP data will be out on Wednesday. The AMP’s Dr Shane Oliver says at this stage, GDP could have grown by 0.2% in the three months to December, down from 0.6% in the September quarter. Other forecasts (from the NAB) say it will be around 0.5% to 0.5%.
Annual growth will slow to 2.2% with net exports (due Tuesday in the December quarter Balance of Payments) detracting 0.7 percentage points from growth. This will be offset by a bounce back in consumer spending and growth in business investment.
Business profits and wages data are also out today, along with government finance data tomorrow. That could be the bug imponderable.
Building approvals for January are out later today (and should show a rise after December’s fall), along with the ANZ job ads survey which is forecast to show another rise.. Retail sales for January are out tomorrow and will be soft (they could show another fall) and the trade data on Thursday is likely to reveal another small deficit.
