The health of emerging markets dominate the rest of the week and the market driven fear of traders will mean that much of the week’s news from other areas (economic data, corporate results and the like) will be overshadowed by the clamour of bears shorting currencies and stocks from countries such as Russia, China (via the Aussie dollar), Turkey, Brazil, India and so on.
So keep an eye on the data and results flow as well as the moves from the markets.
In Australia, the flow of official data will be light on, compared to offshore where the Fed holds its first meeting of the year, the first estimate of US 4th quarter GDP will be released, as does Britain, data on employment and inflation in Europe and the usual end of month flow of data from Japan, including the all important reading of inflation.
China pops up again with the official survey of manufacturing activity and the final reading of the HSBC/Markit survey whose ‘flash’ survey results last week caused a disproportionate amount of concern about the health of the Chinese economy.
They will both be issued on Thursday, ahead of the Lunar New Year starting on Friday.
This means for China and some other Asian countries, markets will shut from the end of the week (January 31 onwards), with the year of the Horse arriving.
That will mean light trading across the region this week and next.
For China it will mean just one month of variable economic statistics – January’s will be OK, if not boosted a bit on the import and production side to take account of the week-long shutdown.
February will be hit by the New Year (also called Spring Festival) holiday, with imports and exports lower and inflation probably a touch higher for January.
Japanese data on retail sales, unemployment, industrial production and inflation are due out Thursday and Friday.
All will show the economic rebound continues, but the inflation rate will be dissected to see if deflation is being replaced with inflation.
The headline figures suggest that, the core figures (with energy costs stripped out) suggest it might not be as clear cut.
Certainly the Bank of Japan fears that deflation is still lingering after it warned last week that the inflationary boost it was looking for to boost the economy was in danger of stalling.
Trade data out yesterday for December showed the impact of the weaker yen with a 15.4% rise in the value of exports last month and a 24.7% surge in the value of imports.
The Reserve Bank of India releases its latest decision on interest rates tomorrow.
In the US, the much anticipated first reading of 4th quarter economic growth – it could be as high as an annual rate of 3% (after earlier being pegged at less than 2%) after the 4.1% annual rate reported for the third quarter in the final estimate in late December.
The AMP’s Dr Shane Oliver says a 3% annualised gain in GDP data will be driven by solid growth in consumption and investment and positive contribution from trade.
The GDP report is out on January 30, a day after the Fed Open Market Committee meets in Washington.
In its post meeting statement early Thursday morning, Sydney time, the Fed is likely to trim a further $US10 billion from its quantitative easing program to reduce it to $US65 billion a month.
The meeting will be the last chaired by Ben Bernanke and the market will be looking to the post meeting commentary on the economy to see if there are any final words from the outgoing chairman.
There will be no economic forecasts or press conference after the two-day meeting.
Recent US economic data suggests the US economy is still picking up pace in line with Fed expectations but with pockets of uncertainty remaining with inflation remaining very low.
Other US data releases will include another rise in house prices (Tuesday night, our time), a solid rise in durable goods orders (also Tuesday night).
US December quarter earnings results will continue to flow. Apple and Caterpillar were among the majors reporting overnight.
Ahead of this week reporting companies include Amazon, Ford, Comcast, Viacom and Chipotle Mexican Grill, Dupont, Chevron, Exxon Mobil, AT&T, Pfizer, Via. 3M, Yahoo, Facebook, Google, Dow Chemical, Conoco, UPS, Mastercard, McKesson and Amgen.
The Bank of Canada releases its latest interest rate decision on Wednesday night, our time and the central bank’s comments on the sharp fall in the value of the dollar and the slowing economy (contrary to what is going on south of the border) will be watched closely.
The trajectory of the Canadian and Aussie dollars are similar at the moment, but the Canadian economy is slowing, with an as yet unresolved property boom to be pricked, either by the authorities or by a sudden drop in property prices.
The first estimate of 4th quarter GDP for Canada will be released Friday night our time and will help fill in the picture about the slowing economy.
In Europe, Eurozone business and consumer confidence data for January (Thursday night, our time) are expected to confirm the slow but continuing economic recovery.
Unemployment (Friday night) is expected to have remained at 12.1% in December and inflation is also likely to have remained below 1% in January (also due Friday night, our time).
A first estimate of Q4 GDP is published in the UK tonight, our time, and is likely to confirm the economy’s rebound is continuing with growth around an annual rate of 2.4%.
In China, the official PMI (Friday) is expected to fall a bit further consistent with the HSBC flash PMI on Thursday afternoon, our time. The Lunar New Year on Friday will see China and parts of Asia close for between three and five days.
In Australia, a quiet week ahead of next Tuesday’s meeting of the Reserve Bank board.
The NAB’s business survey (today) is likely to show a further slip in confidence after its post-election bounce, new home sales (Thursday) are likely to be solid and credit growth (Friday) is likely to remain subdued.
Export and import price data on Thursday from the Australian Bureau of Statistics is likely to show a further fall in our terms of trade.
More quarterly production reports including Origin and Paladin, with the most important coming from the iron ore group Fortescue on Thursday.
Orica holds its AGM midweek.
