Last week was very busy for investors here and offshore – rate rises from three major central banks, lots of key economic and business data, earnings reports in the US, Asia, Europe and Britain and the continuing war in Ukraine.
By way of comparison, this week looks lighter, but there’s the now usual big monthly test from the US consumer price inflation report – on Thursday this month, and before that, from the one-off midterm national and state elections in America.
All this will again test investor sentiment in the wake of the mixed stockmarket rally of the past few weeks which is now spluttering in the US and elsewhere, but which saw a charge higher in China, Hong Kong and commodity markets late last week for no justifiable reason.
Wall Street’s rebound on Friday after the poor jobs data for October eased some of the gloom since the Fed on Wednesday lifted interest rates and Chair, Jerome Powell made it clear the Fed will take rates higher than many investors had hoped to crush inflation.
The size of the inflation target for the December meeting Fed will be up for grabs in Thursday’s report for October – a reading around 8% – 8.1% annual is the forecast or around the level for the past couple of months (8.2% in September) but well under the 9.1% peak in June.
The AMP’s chief economist Shane Oliver wrote at the weekend “Higher gasoline prices are expected to push up the monthly CPI by 0.7% month on month but annual inflation is likely to drop to 8% as higher increases a year ago drop out. Core inflation is likely to slow slightly to 0.5% month on month leaving annual core inflation at 6.6%.”
The results and just who won the midterms on Tuesday won’t be clear until December with close races in the Senate especially and one or two house seats likely to see long voting lines, counting and lots of legal action right up to the Supreme Court.
There’s a debt limit and funding deals to be struck by the old Congress by the end of the year.
US earnings for the September quarter slow this week – 86% of S&P 500 companies have already reported. Of that figure only 70% of those reporting so far are ahead of expectations – a bit below the norm of around 76%.
“Against this, earnings growth expectations for the quarter have now risen to 4.9%yoy, up from 2.6%yoy at the start of the reporting season, and looks likely to end up coming in around 5.5%yoy. Unfortunately, earnings strength is concentrated in energy stocks – if they are excluded earnings are down 2.9%yoy. Earnings growth outside the US is running stronger than in the US,” Dr Oliver wrote.
Retailers dominate US earnings reports this week
Retail companies down to report this week in the US include Ralph Lauren, Ross Stores, Kohls Corp, Macy’s, Foot Locker, TJX Companies and Shoe Carnival.
As well reports are also expected from Mazda, Honda, Mitsubishi, Bayer, Merck, Astra Zeneca, Saputo, Commerzbank, Walt Disney, Alibaba and Occidental Petroleum.
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In Australia there’s the monthly business report from the NAB tomorrow and the consumer confidence update from Westpac and the Melbourne Institute.
The NAB survey will show the economy is still solid, while consumer confidence will have taken another hit from the Reserve Bank’s rate rises.
Westpac (today) and the NAB (Wednesday) report full year profits – both are expected to be solid but analysts will be watching costs (at Westpac) and the path of net interest margins (at both).
Orica also reports its full year earnings this week.
There’s also a number of annual meetings this week, including BHP (Thursday), Amcor (after the good 3rd quarter report last week), Bendigo Bank, Ansell, Breville Group, Sims Group, Nearmap, Coles Group, REA, Newcrest, Seven West Media, Cooper Energy, Nine Entertainment, Mount Gibson Iron Ore and Computershare.
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Chinese trade data for October out today is expected to show a further slowing in exports and imports and inflation data on Wednesday is likely to show CPI inflation falling back to an annual 2.5% from 2.9% and producer prices falling by an annual 1.6%.
The continuing crackdown on Covid will be the big issue again amid all those rumours of the Xi Jinping government relaxing its hardline approach.
