After the Liberal Party leadership meeting this morning and the fallout, it will be time for everyone to focus on the real issues – the economy and corporate earnings.
So the economy and earnings will end up dominating sentiment in Australian markets this week, thanks to expected comments and speeches from senior Reserve Bank officials, the latest housing data, the all important jobs report for January, and earnings reports from corporate giants like Telstra, Cochlear, CSL, Rio Tinto and especially the Commonwealth Bank.
The start of the January economic data reports from China will also hit local thinking, with yesterday’s trade figures to be followed by the inflation figures tomorrow.
Offshore, the Eurozone GDP figures will be released, while the earnings season in the US starts to slow down, but peaks in Europe and Asia.
In Australia, remarks by RBA Governor Stevens (today) and his first parliamentary testimony of the year (on Friday) will be examined in relation to the RBA’s interest rate cut last week and cuts to its GDP forecasts, but they are unlikely to change the view of another rate cut to come.
Another RBA official, Guy Debelle the Assistant Governor (financial markets) speaks on Thursday in Sydney.
ANZ job ads data (later this morning) should continue to show modest growth; the January survey of business conditions and confidence from the NAB tomorrow will likely remain subdued, December quarter house prices are likely to show growth of around 2% quarter on quarter, and housing finance (also out Wednesday) should show a bounce. Lending finance data will be issued on Friday.
Westpac’s monthly survey of consumer sentiment is out on Wednesday and should reflect the impact of last week’s surge in political instability in the government.
But the market reckons the January employment on Thursday will be weak after a couple of solid months. The AMP’s Chief Economist Dr Shane Oliver says employment “likely to have fallen by 10,000 after several unbelievably strong months resulting in a back-up in unemployment to 6.2%”.
The December half profit reporting season will also start to get underway in earnest with 30 major companies due to report including Cochlear, Stockland, Telstra and Rio Tinto, Bradken, AGL Energy, Domino’s Pizza, Boral, the Commonwealth Bank, Stockland, Suncorp, ASX and Newcrest Mining.
The AMP’s Dr Oliver writes, “Consensus earnings growth expectations for this financial year have already been wound back to near zero, driven by an expected 28% drop in resource profits on the back of the slump in commodity prices.
"However, the rest of the market is a bit stronger with industrials expected to see growth (for the fourth year on a row) of around 10% and banks to see about 8% growth. Given the difficult economic conditions the risks are to the downside, but ongoing cost cutting and help from the lower $A should be two key positive themes,” he wrote at the weekend.
In Asia, China’s January inflation; its producer and consumer prices are expected to again show no increase.
Producer prices are still in deflation, while consumer prices are tame, up 1.5%. Data on money supply and bank lending are expected to be released over the week.
In Japan the latest current account data is due to be issued later today.
Indian GDP is also out later today for the 4th quarter, while India also sees the release of consumer price and industrial production data later in the week.
In the US the reaction to January’s very strong jobs data will dominate thinking as analysts and other forecasters reset their estimates for the first rate rise from the Fed for more than six years.
Many now say the Fed will put up rates in the September quarter.
January retail sales (on Thursday) should bounce back after softness in December helped by low petrol prices (look at the sales data with the impact of the fall in fuel prices stripped out); while consumer sentiment (out Friday) should hold around an 11 year high.
US December quarter earnings results will continue to flow as the reporting season starts to wrap up as 66 companies in the S&P 500 report this week.
The companies include Time Warner, Time Inc, Whole Foods, Cisco, CVS Health, Coca Cola, AIG, Kellog,Metlife, Tesla, Zillow, Apache, Scripps Networks and CBS.
The Financial Times reports that more than three-fifths of S&P 500 companies have so far announced results, 72% of which have eclipsed forecasts.
Outside the US, some big companies are down to report: Swiss banking giants UBS and Credit Suisse (how will the unpegging of the Swiss franc impact them?), Nissan, ING, Pernod Ricard, Renault, Societe Generale, Rolls Royce, ThyssenKrupp, Thomson Reuters, Baidu, Softbank, Kinross Gold, Bunge, German bank, Commerzbank, Talisman Teck, and Azko Nobel.
In Europe, the tensions in Greece are now starting to dominate markets, as well as the continuing fighting in tensions. But so far eurozone markets have ignored these pressures.
Eurozone GDP data for the December (out on Friday) is expected to show growth of 0.3% quarter on quarter representing a slight improvement from the prior two quarters.
Trade data are also issued in Russia and Germany later today, while Greece sees the release of industrial output numbers, which will make interesting reading.
The Bank of England revises its inflation and growth forecasts on Thursday, followed by a press conference from governor Mark Carney. The timing of the first UK rate will be the main topic of interest.
The Swedish Central Bank announces its latest interest rate decision on Thursday and could see the rate cut to negative levels (the country sold a bond issue late last week with negative yields).
