More attention on the economy here in Australia this week, while banks will again be a major market focus: in Australia with the Reserve Bank board meeting, Westpac reporting and in the US where the results of the stress test have been delayed until later in the week.
Central banks in Europe and the UK may cut rates, or may elect to leave them steady. The ECB may be the leader and the Bank of England will probably watch and look.
This week we will get the Australian March house price index today and then figures on building approvals, retail trade and our international trade picture before Thursday’s labour force figures for April, which will be out before those in the US on Friday night.
The labour force figures will show unemployment rising over 6% here and close to 9% in the US.
Economists expect the RBA will leave interest rates on hold following its Board meeting tomorrow because there is no reason to cut.
The AMP’s Dr Shane Oliver says monetary and fiscal policy have already been eased aggressively, underlying inflation remained stubbornly high in the March quarter and there are some positive signs of an eventual global recovery.
Therefore the RBA will wait and see for another month.
So also read its quarterly Statement on Monetary Policy to be released on Friday. It will give a clue as to future thinking and contain new forecasts from the RBA for growth and inflation.
Dr Oliver says that it’s still the AMP’s view that the cash rate will fall to around 2% over the remainder of the year as the recession continues, unemployment continues to move higher and inflationary pressures abate.
He’s not alone in that view, as a host of other business economists said last week, although some are saying the bottom for the cash rate could be 2.5%
The ANZ job ads figures are out later this morning, while later in the week building approvals, retail sales and the trade balance for March. They will give us a better idea of how the first quarter went and how deep the fall in growth might be.
Employment figures are for April and will be the first set of figures for the second quarter.
Dr Oliver says "March retail sales are likely to rise modestly helped by talk of more stimulus payments to households and private sector surveys suggest that average house prices rose modestly in the March quarter helped by lower interest rates and the increase in first home owner grants. Against this unemployment is likely to have risen to near 6% in April".
We will also read and hear more speculation about the contents of the upcoming Budget (Tuesday week).
Dr Oliver wrote Friday:
"We expect key elements to be another downwards revision to the Government’s GDP growth forecast for 2009-10 from +0.75% currently to a contraction of -0.5% to factor in recession this calendar year, an upwards revision to unemployment rate forecasts to a peak of 8 to 9% next year and extra fiscal stimulus in the form of pension increases, more help for small business, additional infrastructure spending and the delivery of at least most of the tax cuts that have already been announced.
"While there is likely to be a cutback in middle class welfare, extra spending and the recession will nevertheless see the prediction for the 2009-10 budget deficit blow-out to around $60 billion or possibly even higher, from a $35.5bn estimate in February.
"The increase in the first home owners grant will likely be scaled back to focus on the purchase or construction of new homes, which would make sense given the need to build more homes as opposed to just push up house prices."
In the US, the
focus will be on the official release of the results from the stress tests of major US banks, plus Friday’s employment figures; Dr Bernanke’s appearance before Congress, and the remaining first quarter results, with News Corporation a major release.
The continuing news flow about the swine flu will also dominate, but watch for signs of it easing in Mexico, if the slowdown in the number of cases in the past three days is any guide.
Dr Bernanke will appear before Congress’ Joint Economic Committee on Tuesday, while on Thursday he is scheduled to speak on banking supervision.
On the earnings front, up to Friday, about 325 of the S&P 500 companies already reported first-quarter results, with 66% beating estimates, 9% matching and 25% missing.
Some US investors and analysts tell us that’s good news. It’s not.
Many of the estimates from analysts were unworldly and the companies beat them because they were simply too low.
Most estimates were simply useless.
Quite a few companies reported sharp falls in revenue as domestic sales slumped, or the stronger US dollar ravaged income statements.
Many companies drove earnings through cost cutting, losing millions of jobs, services, advertising and marketing and other cost cuts all helped produce better than expected results.
The slide in commodity and raw material costs, especially oil, also helped.
The oil majors all reported profit falls of 50% to 70% in the quarter, led by Exxon, BP, Shell and Chevron. All are hacking into costs and exploration and development costs.
That means the prospects for shortages of oil and gas and higher prices in the not too distant future are rising: much to OPEC’s delight.
Besides News Corp, Disney also reports from the media sector as does CBS.
Telco Sprint, Tyson Foods, Kraft Foods, Cisco Systems, homebuilders Pulte Homes and D.R. Horton and insurer Allstate Corp are also down to report. Berkshire Hathaway held its annu
