There’s more offshore for markets to fret over in the coming week besides the busy lead up to next week’s Reserve Bank board meeting and third quarter GDP figures.
Events in the US, China and Europe will impact markets ahead of the most important events globally – America’s jobs, unemployment and wages data for November on Friday night and before that, a major speech midweek by Fed chair Jay Powell.
The week is very busy in Australia with lots of data, especially on house prices and retail sales, as well as investment, plus a string of company annual meetings and a couple of interesting financial reports (see below).
As well there’s the continuing climb in China’s Covid cases and then the impact of that on China’s manufacturing and services sectors in the start of month surveys later in the week, as well as progress on the expanding bailout of the country’s embattled property sector.
China’s modest easing of monetary policy on Friday will hit market sentiment when trading resumes later this morning.
There’s also inflation and unemployment data from Europe, Jobs data from Japan and output.
In the US it’s a toss-up between the speech by the Fed chair on Wednesday and the jobs data on Friday.
On balance, the speech by Powell will be more influential because he has chosen to make it on the final day before the two-week blackout ahead of the Fed’s meeting on December 13 and 14.
Obviously he has something to say about policy, if he didn’t want to say anything, Powell would not be speaking.
Investors will have to work out the message for themselves. Most are betting (hoping, really) it will be a warm up about a pivot to lower and slower rate rises from December’s meeting onwards.
AMP chief economist Shane Oliver wrote at the weekend that “Powell is likely to reiterate recent Fed commentary expressing an openness to slowing the pace of rate hikes but indicating that more rate hikes are required as part of an effort to keep financial conditions relatively tight (and hence shares from rallying too quickly).”
The Fed meeting will see the latest economic forecasts and the so-called ‘dot plot’ showing where Fed Open Market Committee members see rates heading next year and 2024 which will set the tone for market sentiment until early 2023.
Friday’s jobs data is expected to show a further slowing in payroll growth to 200,000, flat unemployment at 3.7% and a further slowing in wages growth to an annual rate of 4.6% from 4.7% in October.
If a reading of 4.6% happens, it will mean wage growth has dropped 1% in the final 9 months of 2022 from the 5.6% annual rate at the start of this year.
Other US data this week includes home prices and consumer confidence (both Tuesday), pending home sales and job openings on Wednesday and the November survey of manufacturing conditions index on Thursday).
The second update on US third quarter GDP is due for release midweek, while the latest figures on US initial unemployment benefits will be out on Thursday and could surprise on the upside.
As well the latest PCE data (the stuff the Fed follows closely) will be released. The data tracks consumer spending, prices and income and the core private consumption deflator is a de facto monthly check on the CPI and prices generally.
US car sales data will be out Thursday and Friday – electric vehicle sales will attract attention. US quarterly earnings reports are almost finishes. Reports are expected from a few companies, led by supermarkets chain, Kroger (which wants to merge with rival Albertsons).
Other reports will come from Dollar General, major Canadian banks and EasyJet in the UK. Reports are also expected from tech companies like Salesforce and Snowflake.
The eurozone sees ‘flash’ data on inflation and unemployment for November on Wednesday and Thursday. Dr Oliver says eurozone inflation “is likely to remain around 10.7%yoy but core inflation is likely to have risen to 5.5%yoy and unemployment is likely to be unchanged at 6.6%yoy.”
In Japan, there’s jobs data on Tuesday and industrial production data on Wednesday – both will again confuse analysts about the health of the country’s economy which seems to slipping into another slowdown, even though it has the easiest monetary policy among developed economies.
China’s business conditions PMIs for November on Wednesday and Thursday are likely to have weakened further given Covid cases. Covid cases are now running at more than 30,000 a day – the highest in the three years of the pandemic with no signs of a slowdown. Beijing, in particular, has been hit hard.
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This week’s data flow in Australia will be more a case of filling in the gaps rather than any dramatic new understanding – and that won’t change until the following week, when the Reserve Bank’s next rate rise and September quarter GDP data are released.
Then it will get interesting with three weeks of 2022 to go.
First up the local data here this week makes for a busy time for investors.
The economy heads into the final month of the year a little battered compared with the start 11 months ago – there’s higher inflation after the Russian invasion of Ukraine, higher interest rates, a stronger jobs market and a new federal Labor government.
Corporate profits are under pressure because of higher inflation and costs with resource projects starting to be delayed because of higher costs and continuing (though easing) shortages.
In Australia, the monthly inflation data for October (on Wednesday) from the Australian Bureau of Statistics is forecast to show a further lift in inflation to an annual rate of 7.4%.
But the AMP’s chief economist Shane Oliver said that as “the monthly CPI misses out on about 30% of CPI components including gas and electricity prices so it may understate actual inflation.”
The monthly indicator doesn’t provide data capable of extracting an accurate core inflation reading, though some economists will no doubt try.
RBA Governor Lowe’s participation in a panel discussion in Thailand on Friday will be watched for any further clues on the interest rate outlook but it is hard to see him saying anything new after two public appearances in the past month and the recent Statement on Monetary Policy and the minutes of the December board meeting.
The preliminary data for October’s retail sales later today are forecast to show a rise of 0.4% from September which Dr Oliver says will be mostly due to inflation.
Building approvals for October are expected to be flat, credit growth for November is forecast to show a further slowing in housing credit growth and Wednesday’s September quarter construction data is forecast to have risen on by around 1.4% (That’s the start of the final flow of data for the National Accounts next Wednesday).
Private sector business investment data for the three months to September on Thursday also feeds into the national accounts and is likely to rise by around 0.7% with capex plans remaining solid, according to Dr Oliver.
Housing finance figures on Friday are expected to bounce 3% after a sharp fall in September.
Thursday sees the newsworthy Core Logic home price data for November which is expected to show further 1% fall in national dwelling prices, according to Dr Oliver.
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There’s also a string of annual meetings, with at least three that will see a lot of shareholder interest and criticism.
Two companies – Ramsay Health Care and Link Administration Holdings – were involved in takeovers which dragged on and on and failed to be completed. A third company, BWX, has delayed its 2021-22 results several times
Ramsay’s meeting is tomorrow, Link shareholders meet on Wednesday, BWX is due to report today.
BWX’s update will be sure to generate a lot of angst and commentary from investors because of the delays to the release of the figures.
BWX has postponed the release of its results several times because of delays in the audit and getting hold of accurate data.
Watch for the restatement of previously released figures for the past couple of years and significant overstocking of slow-selling products.
The share prices are lower than the offer prices (the Link offer from Canadian company Dye and Durham was also running into competition problems in Australia) and Link’s role in a high-profile UK investment fund’s messy closure has exposed the company to possible fines and other charges in the hundreds of millions of dollars as well as losses from a class action.
Ramsay got an $88 per share indicative offer from KKR but that was cut and the whole situation ended confused and unclear.
Other meetings include Premier Investments, Temple and Webster, Genesis Minerals, Mayne Pharma, Sandfire and Castillo Copper which might have more on the company’s rare earths exploration activities around Broken Hill.
Besides BWX, results are due from Collins Food and Fisher and Paykel Healthcare.
