There’s a lot this week to grab the attention of markets and investors in Australia and globally.
There’s the Covid’s Delta variant, US consumer price inflation, key Chinese economic data, Australian jobs for June, the start of US quarterly bank profits and central bank decisions in Canada, Japan, South Korea and New Zealand.
On top of that there’s the direction bond yields and fears about the impact of the new Covid infections on growth, the value of the Aussie dollar and what this all means for equities and commodities.
And especially for Australia where this week will be dominated by the lockdown in and around Sydney and the way the infections of Covid’s Delta variant continue to grow.
Australia also sees the latest NAB business conditions and confidence survey tomorrow and the Westpac/MI consumer confidence survey (Wednesday). They are are expected to show some softening reflecting recent lockdowns but with conditions and confidence at solid levels.
The Jobs data for June on Thursday is expected to see employment constrained a bit by the late May/early June Victorian lockdown, according to the AMP’s Dr Shane Oliver.
He wrote at the weekend that we can “expect employment to rise by 20,000 jobs with unemployment unchanged at 5.1%.”
The July report in a month’s time will show the impact of the Sydney lockdown and an end to the strong jobs rally this year.
China’s economic data dump this week will probably show signs of softening in the wake weaker activity surveys for June, Friday’s slide in consumer inflation in June and the small easing in producer prices,
June quarter GDP on Thursday is the major release this week. The AMP’s Dr Shane Oliver expects Chinese GDP growth to show a rebound to 1.0% quarter on quarter after the 0.6% growth in the March quarter.
But he also expects annual growth to slow to 8% from 18.3% as the low base in March quarter last year drops out of annual calculations.
“June data is expected to show a further slowing but still strong imports and exports (Tuesday) and retail sales, industrial production and investment (Thursday) as favourable base effects a year ago continue to drop out.” The data will be for the month, the quarter and the first half of 2021.
Economists at Moody’s wrote on Friday “We look for GDP growth to slow to 6.5% year over year in the June quarter, following the 13% gain in the March quarter.
“Base effects are the primary driver of the slowdown as the economy spectacularly contracted by 6.7% in the March quarter of 2020 as COVID-19 first hit and caused major disruptions, but by the June quarter, GDP growth improved to 3.2%.”
June car sales data and bank loan figures were issued early, on Friday instead as scheduled for today (Monday).
In America the focus is likely to be on June inflation data, rising Covid transmissions, the path of US bond rates and the impact on Wall Street which has already been worried by the Chinese government attack on US listed companies.
The US Consumer Price report for June tomorrow will probably show an easing. AMP’s Dr Oliver wrote at the weekend “with largely transitory pandemic-related bottlenecks continuing to impact but with some slowing in the rate of increase as pressure starts to abate a bit thanks to increasing production and slowing goods demand.”
He said we can “expect CPI inflation to slow slightly to 0.5% month on month taking the annual inflation rate down to 4.9% year on year from 5% in May. Monthly core inflation is also likely to slow slightly but with the annual rate rising further to 4% yoy.”
“Producer price inflation (Thursday) is also expected to show some slowing in the monthly rate of increase.”
In a busy week, the US also sees updates on small business confidence (tomorrow), a further solid increase in June industrial production and solid readings for the July New York and Philadelphia regional manufacturing conditions indexes (all Thursday) and a slight pickup in underlying June retail sales (Friday).
June quarter company profit results will start to be released this week which will be dominated by America’s top banks (see separate story).
Dr Oliver says the consensus is looking for a 62% year on year rise in earnings “boosted by base effects from last year’s slump but the rebound in various macro variables suggesting this could end up being +90% or so.”
The Bank of Canada and RBNZ (on Wednesday), South Korea on Thursday and the Bank of Japan (Friday) are expected to leave monetary policy unchanged.
