A delicate week ahead for economies and markets with half a dozen events or factors that could bolster or whack momentum and investor confidence.
The list is led by the two-day meeting of the US Federal Reserve midweek, here in Australia tomorrow at the Reserve Bank and the Bank of England on Thursday.
Rate rises coming from all three meetings with the RBA’s the smallest expected at 0.25%. The Fed and Bank of England are both expected to wheel out another 0.75% lift to try and strangle the high inflation rate.
Some analysts reckon a 0.50% lift is not off the table with the RBA because of the high inflation reading last week.
There’s also the usual start of month surveys of manufacturing around the world and then service sector activity, starting in China today and then globally tomorrow.
Not far behind in their importance will be the October jobs data for the US; there’s also the biggest week of the September quarter and half year reporting seasons in the US and elsewhere.
There’s also third quarter GDP in Europe as well as October inflation and jobs data, home prices in Australia and the US, Australian retail sales and the worsening Covid situation in China which is worrying commodity markets.
Some 150 S&P-500 companies are due to report this week, along with hundreds from Europe, Canada, Japan, China and the UK.
Analysts are wondering if US share prices can continue to weather what has become very frustrating income news. That said, last Friday saw the size of the earnings gain this quarter boosted by huge earnings reports from Exxon Mobil and Chevron.
For Exxon, the $US19.7 billion is the highest quarterly profit in its history, while Chevron’s $US11.2 billion was its second-highest ever. Shell and Totalenergies also reported huge results for the three months to September 30 at more than $US9.5 billion, with more coming this quarter.
More than 150 S&P 500 business are because of report quarterly outcomes next week, consisting of Eli Lilly, ConocoPhillips and Qualcomm, New York Times, Fox Corp, News Corp, Berkshire Hathaway next weekend.
Reports are also expected from PayPal, eBay, Starbucks, Singapore Airlines, Nomura, Liberty Global, Japan Airlines, Toyota, Itochu, Clorox, Panasonic, Mitsui, BP, Sony, Newmont, Barrick Gold, Uber, Mondelez, Alibaba, Warner Bros Discovery, Pfizer, Moderna, Turquoise Hill and J Sainsbury, among others.
US economists, including those from Moody’s, reckon a 0.75% rate rise is a lock from the Fed, but that the central bank might try and temper expectations towards smaller increases.
Apart from the rate rise, the main focus of the week will be on October’s employment report due on Friday, which Moody’s economists think “will show that job gains remain steady despite heightened economic uncertainty.”
September saw the jobless rate dip to 3.5% as the number of new jobs fell to 263,000. Most US forecasts around for around 200,000 to 230,000 new jobs for October and a slight rise on the jobless rate to around 3.6% to 3.7%.
Other key data expected this week include US manufacturing and service sector activity, CoreLogic home prices, vehicle sales for October, initial jobless claims, and US productivity data for the third quarter.
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In Australia, there’s the RBA meeting tomorrow with new forecasts to be hinted at in the post meeting statement from Governor Phil Lowe and then expanded on in the 4th and final Statement on Monetary Policy for the year on Friday. That will contain new GDP, wages, employment and inflation forecasts for 2023 and 2024.
Governor Lowe will be in Hobart (the board is in the Tasmanian capital for its meeting) for a dinner with local leaders on Tuesday night and he is scheduled to make remarks to the function which will be streamed live because he will be commenting on his earlier statement.
Moody’s economists said at the weekend that are looking for a 25-basis point hike, bringing the cash rate to 2.85%.
“Odds of a 50-basis point hike have increased since the upside surprise to inflation in the September quarter. Headline CPI was up 7.3% y/y, the fastest pace since 1990.
“Meanwhile, underlying inflation clocked the fastest increase since the series began in 2003, rising 6.1% y/y.
“Demand-side pressures are running hot, keeping pressure on the RBA to forge ahead with a higher cash rate. Cumulative rate hikes since May total 250 basis points, more than double the 65 basis points that were cut through 2020 in response to the COVID-19 crisis.”
Besides the RBA meeting and monetary policy statement there’s the early retail trade figures for September out today from the Australian Bureau of Statistics (ABS) usual start of month figures on house prices from CoreLogic tomorrow – watch for another fall.
Building approvals for September are out on Wednesday from the ABS and the Bureau will release the lending data for the same month on Thursday (mainly the home loan approvals) and September’s trade data.
There’s a smattering of results out this week – Amcor in the US with its September quarterly figures, REA Group on Friday morning (along with News Corp) while building products group, CSR releases its interim figures on Thursday, along with Pendal. Qantas holds its AGM this week as well.
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In Europe, it’s third quarter economic growth and October’s inflation and jobless data. Moody’s economists are forecasting zero growth in the three months to September, thus marking a rapid slowdown from the 0.8% quarter-over- quarter rise in the three months to June.
“The preliminary release will not include a detailed breakdown of GDP components. But we expect to see that the support from consumer spending on services counteracted by falling goods spending, sluggish investments, and a real deterioration in the trade balance.”
“We expect that preliminary estimates will register a 9.9% year-on-year increase in the euro zone’s harmonized index of consumer prices, unchanged from September’s rate. Energy prices, especially gas remains a big driver, but prices plunged during October, so there might be a little relief looming.
“An inflation peak in October could allow the European Central Bank to slow its pace of hiking at future meetings, down to 50 basis points at the December meeting, for example, from the 75 basis points at the September and October meetings.
The Bank of England will meet on November 3 and “we forecast that it will increase its bank rate by 75 basis points to 3%: in line with market expectations.
“The energy price guarantee that will cap energy and gas prices until April 2023 will do much to mitigate inflationary pressures. But there will still be strong pressure from food and core components, meaning the BoE cannot rest just yet.”
Besides the RBA and Australia’s data releases this week, China sees the government run survey of manufacturing later today and the private sector survey results tomorrow. Both are forecast to be weak – either a small contractionary rate or a tiny rate of expansion.
Manufacturing surveys for other Asian economies – most notably Japan and South Korea – will also be weak, while South Korea’s export data for October will also be in focus.
According to Moody’s “South Korea’s export picture is a bellwether for the region, indicating how Asia’s important export engine will be increasingly challenged next year by softer conditions in the important European market and, to a lesser extent, the U.S.”
