The week ahead will see – reaction to the weak end to the COP26 climate change conference in Glasgow, reaction to the upsurge in Covid Delta cases in 51 countries, China’s final economic data for October, the last week of US earnings for the September quarter (with retailers dominating) and in Australia the minutes of the November monetary policy meeting of the Reserve bank and a major speech from governor Philip Lowe.
Production data for October for the US and China will give us a good sign how both economies have started the 4th quarter, as will retail sales. The betting among economists is a solid start for the US and a weak beginning for China where Covid Delta won’t go away, nor will power concerns.
Both the US and China face growing inflationary pressures as they head towards the end of 2021.
In Australia, the minutes from the last RBA meeting and a speech by RBA Governor Lowe on “Recent Trends in Inflation” on Tuesday will no doubt be watched closely but will likely reinforce the message from the RBA that it does not expect the conditions to be in place to justify a rate cut until 2024, or 2023 at the earliest.
Meanwhile, September quarter wages growth on Wednesday is expected to remain subdued at 0.5%qoq or 2.1%yoy reflecting the impact of the lockdowns and the delayed increase in the minimum wage for some industries.
There are a few more September results out this week – Incitec Pivot and Nufarm today, Elders later in the week, united Malt also later in the week and Brisbane based tester, ALS.
Aristocrat Leisure release sits full year figures – they have already been upgraded but the real interest will be in the rumoured counter bid for Playtech from that company’s second largest shareholder, Gopher investments. That hasn’t been firmed up.
However, the major earnings release will be the first (September) quarter trading update on Wednesday from the Commonwealth Bank.
This week again sees a host of annual meetings – News Corp and Fox are due to hold virtual meetings in the US this week while Resmed, another Australian giant operating in the US is due to hold its meeting this week.
Others to hold meetings include WiseTech Global, Sonic Healthcare, Mirvac, Northern Star Resources, Aspen group, BlueScope Steel, BWX, Silver Lake, Seek, Seven Group Holdings, Medibank private, Western Areas and New Hope.
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But the rapid worsening of Covid infection rates in more and more countries is looming as a major blow to hopes of a solid global economic recovery that continues in 2022.
The US, Russia, Singapore, Germany, Spain, Netherlands, Italy, Austria, the UK, Turkey and Switzerland are among those countries reporting rising infection numbers or elevated figures. Thankfully death rates are low compared to a year ago.
The latest COVID-19 resurgence in China had spread to 21 provincial-level regions as of Saturday, where new locally transmitted cases or asymptomatic carriers were reported during the past few days, a Chinese health official told a media conference on Saturday.
Reuters data showed 62 cases reported on Wednesday and China Daily said 57 new cases were reported on Friday.
Chinese customs has tightened border controls for travellers and trade and Beijing’s local government has also tightened access to the city
Though still in a critical stage, the recent COVID-19 outbreak in Dalian, northeast China’s Liaoning Province, has been contained within the city, Wu added.
“China has stepped up epidemic prevention and control measures at its land border ports to cope with pressure from the inflow of COVID-19 cases, the General Administration of Customs (GAC) said on Saturday.
If case numbers worsen in the next few weeks, we could see a repeat of the port congestion that hit exports and container availability across the Pacific earlier this year.
So many economic forecasts for 2022 are predicated on improvements in vaccinations and an easing in Covid Delta cases – vaccination numbers are rising in most countries or have stabilised above 60% to 70% (Australia is higher, upwards of 90% for first jabs and over 80% for two jabs) but the continuing rise in numbers across Europe and the US are a worry.
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Investors will also be watching the outcome online summit between President Joe Biden and Chinese President Xi Jinping on Monday evening, our time. The talks will come a day after the Cop 26 climate change conference ended with some progress, but with last minute interventions by China and India to water down the parts of the statement about ending coal use.
In the US, retail sales and industrial production data for October are out tomorrow night, Sydney time and solid rises of around 0.8% are expected, according to AMP Chief Economist, Shane Oliver.
The US also sees the release of housing data to show strong home buyer conditions (Tuesday) and a rise in housing starts (Wednesday) and solid readings of around +20 for the New York and Philadelphia manufacturing indexes.
There are quite a few Fed speakers in the US this week but the big Fed-released development will be the naming of the new chair – Jay Powell or his Vice chair, Lael Brainard.
The US September quarter earnings season winds down this week (see separate story).
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Chinese activity data for October later today is likely to show a further slowing in the pace of activity in retailing, investment and production.
Dr Oliver sees a “modest slowing in retail sales growth (to 3.8%year on year for October), industrial production (to 3%yoy) and investment (to 6.2%yoy).
Moody’s economists “forecast China’s industrial production, retail trade, and fixed asset investment to decelerate in annual terms from September as the economy faces challenges on several fronts.”
“Industrial production likely cooled to 2.9% y/y in October from 3.1% previously. The deceleration has been fuelled by curbs on property development, energy disruptions and semiconductor shortages. Meanwhile, retail trade likely cooled to 3.7% yoy in October as the slowing property market coupled with the energy shortage crimp discretionary spending.”
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Japan’s September quarter GDP is expected to show a 0.2% quarter on quarter decline reflecting a surge in coronavirus cases.
Restrictions have eased since then, so GDP should rebound this quarter.
And in Europe there’s updated third quarter eurozone GDP numbers this week which should be solid with the flash release showing a surprisingly strong 2.2% rise.
