More of the same old, same old this week for markets here and offshore – earnings, Covid Delta infections, the Fed’s monetary policy and China’s continuing crackdown on its best-performing parts of the economy, plus more “will or won’t the Fed taper and, if so, when?”
And the fallout from the collapse of Afghanistan will continue to be heard and felt, especially in the US.
Here the focus will be the Covid Delta infections in NSW, Victoria and the ACT, plus the latest full week of June 30 earnings.
We can expect the lockdowns to drive a further decline in August business conditions PMIs (Monday) and an 8% fall in July retail sales on Friday, according to the AMP’s chief economist, Shane Oliver.
He says that the June quarter construction and business investment data (due Wednesday and Thursday) are both expected to show 3% gains with construction helped by strong homebuilding and tax incentives helping capex. However, the lockdowns may impact business investment intentions to be released with the capex data.
The Australian June half profit reporting season will see another big week ahead with 100 major companies reporting comprising about 26% of the share market’s capitalisation (see separate story on earnings).
But globally the fascination with the fate of free money from the Fed and other central banks will mean that Fed Chair Powell’s comments at the Jackson Hole central banker symposium on Friday night, our time, will be the big news of the week.
Economists expect him to indicate that the US economy is getting closer to meeting the conditions to start tapering the Fed’s bond buying, but there will be a proviso about the level of Covid Delta infections – Saturday saw nearly 200,000 reported across the US and 1,500 deaths. As of Saturday, nearly 52% of Americans have been double vaccinated.
The AMP’s Shane Oliver says “We expect a formal announcement at the Fed’s November meeting with a start-up soon thereafter but there is a risk that the announcement could come in September.”
But economists at Moody’s wrote at the weekend: “We don’t believe Powell will send any strong forward guidance on the timing of the Fed’s taper of asset purchases, since doing so would be front-running the Federal Open Market Committee, something Fed chairs normally attempt to avoid.”
On the data front there’s the mid-month business conditions surveys for August out today and tonight (Australia’s will be issued Monday morning).
US existing home sales figures are out today and expected to show a small fall, with a rise in new home sales tomorrow, a continuing rising trend in durable goods orders (Wednesday) and a rise in core private final consumption inflation for July of around 0.3% month on month and an annual rate of 3.6%. (That’s so-called PCE inflation measure the Fed watches closely).
Thursday sees the release of the second estimate of June quarter GDP and economists upgraded their outlooks after the US Commerce Department’s quarterly services survey, or QSS report, last Thursday suggested that gross domestic product grew much faster than the 6.5% annual rate reported by the government in its first estimate last month.
As a result, economists revised their estimates of second-quarter GDP growth to as high as an annual 7.3% rate.
The QSS report showed services industry revenue increased 4.0% in the second quarter, and was 5.7% above its pandemic level. The growth in revenue was led by the leisure and hospitality as well as the travel sectors.
But the report was compiled from data taken well before Covid Delta infections started crimping activity in a lengthening number of US states, cities and towns.
In Europe, the mid-month business conditions surveys for August will also be watched for any impact from Delta variant concerns, but they are likely to remain strong.
Moody’s says Germany’s estimate of second-quarter GDP will likely come in at 1.5% quarter on quarter, following the 1.8% contraction in the first. “Household consumption likely drove the rebound along with public spending,” Moody’s economists wrote.
Japan’s business conditions survey report for August also out today are likely to remain weak given the continuing surge in coronavirus cases in Japan. No boost from the Olympics.
Thursday might see a rise in South Korea’s base interest rate from a meeting of the country’s central bank, though Covid Delta infections remain a continuing concern.
