While the inauguration of Joe Biden as President on Wednesday will dominate this week’s events, the continuing escalation of COVID cases and deaths in the US and Europe, and new cases in China, will be in the background, eating away at confidence in the global economy.
The political events in Washington and expectations of one last atrocity from Donald Trump have already seen unprecedented measures to protect the capital, President-elect Biden and other leaders (including outgoing Vice President, Mike Pence).
That has finally grabbed the attention of financial markets.
Elsewhere in the world, there’s meetings of the European Central Bank and the Bank of Japan on Thursday, China’s December and 2020 GDP report, as well as other economic data today, US earnings for the 4th quarter and labour force data for December in Australia as well as preliminary retail sales for the same month.
Surveys of business conditions for Japan, Australia, the UK, Europe and the US are out on Friday.
Markets now have suddenly become more worried in the wake of the confirmation of the size and shape of Biden’s $US1.9 billion stimulus package.
Retail sales (i.e. household consumption) are falling, unemployment is rising and the $US900 million stimulus package late last month and the new one from Biden, will be hard pressed to keep the US economy from a sharp slowdown.
The US earnings season steps up this week but will give no leads – Friday’s 4th quarter results from three of America’s biggest banks (see the separate story) were not convincing and with another three in the coming week, the stage is set for more disappointment, though a solid report from Netflix and higher than forecast subscribers (more than 6 million) on Wednesday morning, Sydney time, could help.
On the data front there’s housing starts for December on Thursday and the January composite business conditions PMI on Friday).
Home building in the US, like in Australia, is going gangbusters at the moment (which should mean another set of good figures from James Hardie for the December quarter), but struggling Boral?
In Europe, the European Central Bank on Thursday is expected to leave monetary policy very easy having extended its quantitative easing and cheap bank lending programs in December. January business conditions surveys on Friday are likely to remain soft given the ongoing increase in new coronavirus cases.
Thursday also sees the Bank of Japan and AMP Chief Economist Shane Oliver says it is also expected to leave monetary policy at its very easy stance. Japanese inflation data for December on Friday is expected to show continuing deflation and business conditions surveys for January (also Friday) are expected to remain soft given the increase in new coronavirus cases.
Dr Oliver says that today’s Chinese GDP for the December quarter is expected to show a continuing expansion with a 2.5% quarter on quarter gain resulting in four quarter ended GDP growth accelerating further to 6.2%yoy from 4.9%.
For the whole of 2020 this will leave GDP up 2.1%. Economic activity data for December is expected to show continuing strength in industrial production at 6.9%yoy and a further acceleration in retail sales growth to 5.5%yoy and in investment growth, according to Dr Oliver’s weekend note.
In Australia, Dr Oliver says we can expect a slight pullback in the Westpac/MI consumer confidence index for January (due Wednesday) from the 10 year high reached in December as a result of the renewed coronavirus scares in NSW, Victoria and Queensland over the last month,
December jobs data (Thursday) are forecast to show a 25,000 gain with unemployment unchanged at 6.9%, the composite business conditions PMI for January (Friday) to fall back slightly but to a still strong 55 and flat December retail sales (also Friday) after the 7.1% gain seen in November and with coronavirus restrictions providing a bit of a dampener later in the month.
And there will be one or two December 31 interim reports from Australian Foundation Investment Co and Djerrwarrah Investments and a 4th quarter and 2020 production and revenue report from Woodside.
