Interest rate decisions from two minor central banks in New Zealand and South Korea will dominate global markets this week, as will the early November reports on the pace of manufacturing and service sector activity, while there’s also the second estimate of US third quarter economic growth and an expected update on the Fed’s favoured inflation stat.
There’s a few third quarter reports in the US and elsewhere, lots of annual meetings in Australia and the fallout of elections in Chile – the world’s biggest copper producer that could rattle global metal markets and shares of major miners like BHP and Rio Tinto.
It’s Thanksgiving on Thursday in the US followed by Black Friday for US retailers – black because its where many make their profits for the year, although many are doing very well at the moment.
Thanksgiving and the long weekend from Thursday (markets close at 1pm on Friday) means low volumes but generally a positive week going on past years.
There’s also the looming decision on who will chair the US Federal Reserve for the next five years.
Given the global focus on inflation and monetary policy moves it’s no wonder that the markets will be watching the decisions from the Bank of Korea and the Reserve Bank of New Zealand (RBNZ).
Economists predict the RBNZ will lift the Official Cash Rate by 25 basis points to 0.75% on Wednesday, following the first lift in October.
New Zealand’s economy is booming, especially the jobs market as it runs into capacity constraints. Dairying, the most important activity after tourism is soaring with more than $NZ13 billion in returns to the sector forecast in 2022.
The services sector will gain further momentum over 2022 as international borders reopen, lifting the underperforming tourism and education sectors. Covid infections continue to burble along, but it is not going to half a second rate rise this week.
At the same time the Bank of Korea will lift its policy rate to 1% on Thursday as it seeks to cool household debt growth as well as overheating housing markets.
Household consumption has improved in South Korea alongside rising vaccination coverage and reduced movement controls.
Exports have been an ongoing strength to the economy, helped by high semiconductor prices amid the global shortage.
Early activity survey results this week for Japan, South Korea, Taiwan, Singapore, Australia, the US and much of Europe are expected to show a solid pace of activity.
Economists will watch for any new impact of lingering inflation concerns and the surge in COVID-19 cases in Europe which the World Health Organisation has warned that Europe is once again the epicentre of the COVID-19 pandemic.
In the US its Thanksgiving week and data releases will be concentrated in the next three days.
There’s the second estimate of third quarter GDP on Wednesday (perhaps a small gain from the original 2% rise in the first estimate in October). Wednesday also sees the release of October’s personal consumption and spending data including the monthly PCE inflation reading with the core measure the one to watch because the Fed tracks that closely.
The minutes from the Fed’s last monetary policy meeting are out this week as well.
Given the febrile state of the oil market the weekly US stocks and production data on Wednesday will also draw a lot more attention from markets and analysts. With the GDP report, the oil data and the PCE inflation figures, the eve of Thanksgiving could be a very volatile day for markets.
The US activity survey releases are out Tuesday night, our time and will show that the economy remains solid.
The US third quarter profit season is now into October balancing companies – retailers like The Gap, Abercombie and Fitch, Urban Outfitters, Sick’s Sporting Goods, Dollar Tree and Best Buy. Deere and co, Dell J Smucker and Fast Retailing of Japan (owners of Uniqlo) are also due to release results.
About 95% of S&P 500 companies have released their financial results for the third quarter, and 81% of them reported earnings better than market expectations, according to Refinitiv which says S&P 500 companies are on track to grow profit by 42.3% year over year.
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In Australia the flash business conditions surveys for November are out tomorrow and the AMP’s chief economist Shane Oliver says they are likely to show a further rise after reopening in NSW and Victoria especially.
This week sees the start of the run up to the release of third quarter GDP data next week with September quarter construction data on Wednesday is expected to show a 3% contraction and business investment data on Thursday) is expected to fall 1.5% reflecting the impact of the NSW and Victorian lockdowns and both will be inputs to September quarter GDP growth.
But the AMP’s Dr Oliver says “given the reopening it will all be a bit dated and the focus should really be business investment plans which are likely to show a further lift as businesses were surveyed around the time of reopening and given that business confidence held up reasonably well through the lockdowns.
Retail sales data for October on Friday will be more timely and likely show a further solid gain of 2% reflecting the start of reopening in NSW, the ACT and Victoria, according to Dr Oliver.
This week sees a couple of half year profits from Fisher and Paykel Healthcare and Webjet.
There are more annual meetings from the likes of Lynas, Evolution Mining, Brickworks, Lovisa, Link, Ramelius Resources, Kathmandu, Super Group, Kogan, Best & less, Rex, Mayne Pharma, Monadelpheous and Link.
And Wiluna Mining is today expected to confirm details of a big fund raising to get an expansion project for its Wiluna gold mine off and running in WA. The company has already costed the project’s first stage at more than $80 million.
In Europe the upsurge in Covid Delta cases will overshadow this week’s data and other events which will include Germany’s third-quarter GDP estimate.
