Another big week ahead – stockmarkets at record highs as Covid 19’s Delta variant continues to advance; Australian inflation, the US Federal Reserve on tapering and inflation, the initial estimate of US June quarter GDP, a big week in US earnings and a sharp slide in iron ore prices bringing a dose of reality for the ASX.
In Australia, the Consumer Price Index for the three months to June is the major data release and will be out on Wednesday.
According to Moody’s, Wednesday will see a 3% annual inflation rate for the June 30 financial year – while a forecast of 3.9% has come the AMP’s chief economist, Shane Oliver.
On a quarter-on-quarter basis June CPI inflation is expected to show a sharp rise of 0.8% reflecting a 7.5% surge in petrol prices, higher electricity prices in WA and some pick up in dwelling purchase prices and rents and higher government charges (such as child care) than a year ago.
The AMP’s Shane Oliver says the dropping out of the 1.9% slide in the CPI seen in the June quarter last year “will see the long-awaited spike in annual inflation to 3.9% year on year ” in the quarter.
“Underlying inflation will likely accelerate reflecting supply constraints and strong demand to +0.5% quarter on quarter and an annual rate of 1.6%.
Producer price inflation is also likely to big rise due to higher commodity prices on Friday and private credit data for June and the financial year is due out on Friday.
The June 30 earnings season picks up pace a little this week, though the major result will be an interim from Rio Tinto on Wednesday afternoon.
It will be one of the largest results of the reporting period (second only to BHP) at around $US11 billion for the six months according to some forecasts.
Before then 2020-21 financials are due from Australian Foundation Investment Co and GUD today, Temple & Webster tomorrow (Tuesday); Oceana Gold and AMCIL later in the week.
Fortescue Metals reports its June quarter and financial year production data on Thursday. Oil Search is also due to release its June quarter figures as well.
In the US, the Fed is expected to leave monetary policy on hold but continue the taper talk with Fed Chair Powell noting earlier this month that it’s still a “ways off”.
The Fed statement will be out early Thursday morning. Chairman Powell has a post-meeting briefing at 6.30am Thursday, Sydney time.
On the data front there’s new home sales (tonight) and pending home sales (on Thursday), solid growth in durable goods orders and home prices but a fall in consumer confidence (all Tuesday).
Thursday sees the first estimate of June quarter GDP. The AMP’s Shane Oliver forecasts an 8.3% annualised rise while Moody’s forecasts a 7.3% rise. With the new data on GDP, the Bureau of Economic Analysis will release its annual revisions.
Friday sees the June data on consumer spending and the Fed’s favourite inflation measure – the Personal Consumption Expenditure Index (or PCE inflation).
Shane Oliver says the PCE inflation will be up 0.8% in the month and 3.8% for the year – all but unchanged on May.
The June 30 reporting season continues in the US with around 165 S&P 500 companies reporting, led by tech giants like Tesla, Amazon, Apple, Alphabet, Facebook and Microsoft, but a clutch of major industrials and consumer goods companies such as Boeing, Caterpillar, McDonald’s Starbucks, Procter and Gamble and Colgate Palmolive (See separate story).
In Europe, Eurozone economic confidence readings (Thursday) are likely to be strong after a surge in the mid-month surveys of manufacturing and services for early July. The surveys revealed expansion at a 21 year high!
Dr Oliver says June quarter GDP is likely to show a 1.6% quarter on quarter rebound, “driven rebound after two quarters of lockdown driven contractions.”
He also says unemployment is expected to fall and core inflation is likely to fall to 0.7% year on year – all of which will be out on Friday. Moody’s reckons eurozone GDP will be up 1.5% after the 0.3% contraction in the three months to March.
In Asia, Japanese July business conditions PMIs today are expected to show an improvement while industrial production is likely to rebound and jobs data will also be released (both Friday).
The Tokyo Olympics continue, as do cases of Covid in Japan and elsewhere in Asia (Vietnam and Indonesia especially).
And Chinese business conditions PMIs for July are due Saturday.
