America grabs centre stage this week, with the two-day meeting of the Fed, the first estimate for second quarter GDP and a flood of June 30 results – all this will cascade through increasingly fragile financial markets.
Commodity prices are being whacked, US shares seem to be under growing negative pressure, the Chinese economy is not rebounding, as some analysts had hoped, and there’s no sign of any circuit breakers.
So the US earnings season will again be watched closely this week as hundreds more companies release financial reports, but the usual start of month data, some key data on GDP, consumer sentiment, house prices and then the Fed meeting on Tuesday and Wednesday, US time, will grab the headlines.
The Fed is not expected to make any changes to monetary policy, but is likely to express confidence in the US growth outlook and reiterate that an interest rate hike remains on track for later this year.
The AMP’s chief economist Dr Shane Oliver says, “At this stage its 50/50 as to whether the first hike will come in September or December, whereas the US money market appears to be attaching a 25% chance to a September move."
So far as data is concerned in the US this week, there are durable goods orders for June (tonight, our time), home prices, the Markit services PMI and consumer confidence (all on Tuesday night, our time) and pending home sales (Wednesday night).
The June quarter employment cost index (Friday, our time) will be watched for a further rise in wages growth.
The big release is the first estimate of June quarter GDP (Thursday night, our time). Dr Oliver says the report “is also likely to see June quarter growth bounce back to 3% annualised, but watch for a seasonal reanalysis of March quarter GDP growth which is likely to see it revised up from -0.2% annualised to maybe +1%".
A total of 172 S&P 500 companies will report June quarter profit results this week. These will include Facebook, Chevron, Exxon Mobil, Shell, BP, Merck. Pfizer, Whole Foods, ConocoPhillips, Twitter, Mastercard and Ford.
In the Eurozone economic confidence indicators (Thursday night, our time) will give a further guide to how the Greek crisis affected confidence.
Eurozone money supply and bank lending growth (tonight), a slight fall in unemployment to 11% (Friday night) and continued low inflation (also Friday night) in June with core inflation remaining around 0.8%.
And Greece’s bailout talks continue – expect more grandstanding and delays as the government tries to avoid the inevitable.
In Asia, Japanese data for industrial production (Thursday) along with data for jobs and household spending (Friday) are expected to point to a continuation of the economic recovery but with inflation (also out Friday) remaining too low at just above zero.
China’s official survey of manufacturing for July (Saturday) will be watched to see whether it moves lower in line with the flash Markit PMI.
In Australia its a quieter week with building approvals for June out on Thursday, along with the index of export prices to import prices (also on Thursday). Producer price inflation on Friday will be weak, while the Reserve Bank’s monthly report on credit will show more modest growth.
And RBA Governor Stevens speaks for a second time in a week on Thursday.
There are a few annual meetings this week – Programmed Maintenance (which will see discussion of the Skilled merger), ALS the big testing group, and Oceania Capital Partners.
Quarterly reports end this week with the likes of Independence Group and North Star Resorts reporting. June 30 results continue to dribble out with GUD Holdings reporting later in the week.
iiNet shareholders also meet in Perth to vote on the scheme of arrangement in relation to the TPG takeover offer.
