In many respects the coming week will be like a replay of last week: a few key statistics here and there, company earnings reports, especially in Australia, and no move to lift interest rates from an important central bank meeting and other activity.
In the US, the Fed is seen as signalling a bit more optimism about the outlook for the economy and will leave interest rates on hold at zero to 0.25%.
It will also continue to signal rates will remain at current record lows for an extended period.
The Fed issues its usual statement early Thursday morning, our time, after the two day meeting.
Even though the better than expected jobs figures (smaller number of job losses, and fall in the unemployment rate) for July on Friday has buoyed expectations for a stronger than expected economic recovery, the Fed’s likely to be more circumspect.
Retail sales data for July will be out and are expected to show weak consumer activity. Last week’s consumer credit and consumer spending and personal income numbers were very weak for June.
July is not expected to be much better, except perhaps for higher car sales and the temporary impact of the government stimulus spending package.
US consumer and producer inflation figures will also be released, along with industrial production numbers and consumer confidence figures.
Consumer confidence has been weakening over the past two months. Some economists are looking for the July market rally to turn that around, along with the sense that the recession is easing.
US retail sales are expected to rise 0.7% for last month, thanks to higher sales of cars and petrol, compared with a 0.6% gain in June.
On Friday the CPI will be released as will the first reading for August on consumer sentiment from the Reuters/University of Michigan Surveys of Consumers.
Headline CPI is forecast to be steady, after June’s 0.7% rise. Core CPI (excluding food and energy prices) is expected to be up 0.1%, after June’s 0.2% increase.
Chinese economic data for July will start to be released and is likely to show that economic activity is continuing to recover and producer and consumer price inflation is likely to have remained negative.
In Australia, RBA Governor Glenn Stevens will appear before the House of representatives Economic Committee on Friday and is likely to repeat the message from last week’s post board meeting statement and Friday’s Statement on Monetary Policy, that the economic outlook is brightening and that sooner or later interest rates will have to be returned to more normal levels.
But with some uncertainties remaining, rates are on hold for the time being.
Figures for housing finance, business and consumer confidence and wages growth will also be released in the coming week.
The Australian profit reporting season will pick up pace, with the key focus likely to be on results from Bendigo and Adelaide Bank, the Commonwealth Bank, BHP Billiton, JB Hi-Fi, Cochlear, Stockland, Telstra and Leightons.
The AMP’s Dr Shane Oliver says "We are expecting a 20% fall in earnings per share for the 2008-09 financial year, compared to consensus estimates for a 23% fall.
"Either way 2008-09 was likely the worst year for profits since 1990-91 when EPS fell 26%.
"However, just as we have seen in the current US profit reporting season, big cost cutting and the upside surprise in Australian economic indicators over the last few months suggests there is a good chance that profit results will surprise on the upside, particularly for retail, resources and building materials stocks.
"More importantly it’s likely that some companies will start to signal that the worst is over."
In the US earnings reports will be dominated by Wal-Mart, the biggest retailer in the world and probably the one company that has found its fortunes improving as a result of the recession and credit crunch.
Other US retailers reporting include Nordstrom, the upmarket department store chain, teen apparel mainstay Abercrombie & Fitch and mid-market department store operator Kohl’s Corp. Macy’s, another department store chain, JC Penny and Liz Claiborne will also report.
Reuters reported on Friday that the earning season is on its last lap: 73% of S&P 500 companies that have reported have beaten analysts’ expectations, spurring the second leg of the market rally after stocks’ sharp advance from March lows ran into a speed bump in June.
Including those retailers, this week sees 17 more companies from the S&P 500 expected to report.
In Europe, results are expected from energy giants E.ON and RWE, food giant Nestle, beer group Anhesuer-Busch InBev and insurers and financial services groups Aegon and Prudential.
The European Union’s statistics office is due to release eurozone industrial production midweek, and the first reading on second quarter economic growth.
