Commodities will again dominate the coming week, one way or another. Oil and iron ore prices for instance, will be important for investors to assess, along with data from countries like China (tomorrow) and the first reports from major miners which start emerging in Australia this week.
The all-important production reports will be released this week by Rio Tinto (on Tuesday final quarter and financial year to December), BHP Billiton (on Wednesday, second quarter and first half), Woodside and OZ Minerals (Thursday, final quarter and full financial year to December) and Santos on Friday (final quarter and full year to December).
BHP last week wrote off $US7.2 billion ($US4.9 billion post tax) from the value of its US shale oil and gas assets, and this week we can expect confirmation of write-offs from Woodside and Santos, even though they are only releasing production reports.
Investors will want to know the damage to their balance sheets from the oil and gas price collapse – and there will be similar questions posed to BHP, OZ Minerals and Rio Tinto managements in post-release briefings.
But China will remain in the spotlight this week with expectations of sliding economic growth to be confirmed tomorrow.
In fact China’s economic growth looks set to slide to the weakest since the global financial crisis.
Economists are generally pencilling in a 6.8% annual rise, down from 6.9% in the third quarter and the weakest since the start of 2009. The slowdown would mean China’s growth of 6.9% in 2015 was the weakest for 25 years. Government media has already ‘announced’ the 6.9% figure.
The monthly updates to China’s industrial production and investment figures will confirm that the slowdown showed no signs of letting up in December. The only bright spot will be another month of growth in retail sales.
Housing data is due for release later today.
This week also sees monetary policy meetings in the eurozone, Canada and Brazil as well as flash surveys of manufacturing activity (but not for China) releases and a run of inflation data.
The European Central Bank is unlikely to make any change to its very expansive monetary policy this Thursday night, our time. It’s likely that the central bank will want more time before making further adjustments to its stimulus package.
Eurozone Flash manufacturing data for January will be updated on Friday night (and for parts of Asia and the US) and it will be up a touch, according to market forecasts.
The Central Bank of Brazil and Bank of Canada will also hold monetary policy meetings this week.
With both economies struggling from the commodities slide (and Brazil already in deep recession) both countries’ currencies are sliding.
While markets will be looking for determined support from policymakers, there’s not much they can do.
A rate cut in Canada is widely touted, but that won’t have much of an impact on the damage the commodities slide is wreaking on the economy or the housing boom which is slowing.
And a rate cut in Brazil would normally happen to ease the pain of the recession, but still spiralling inflation will rule that out.
In the US, the home builders’ conditions index (Tuesday night, our time) is expected to remain solid, December housing starts (Wednesday night) should show further strength, and a rebound in existing home sales is expected for December.
The markets are watching for a small gain in the US Markit manufacturing conditions index (Friday night). Headline Consumer Price Inflation (Wednesday night) is expected to remain close to zero, with core inflation running around 2%.
The December quarter profit reporting season accelerates this week with analysts expecting a 6.7% decline in profits and downgrades galore, especially in retailing.
In Australia, the main focus is likely to be on the Westpac consumer sentiment reading for January (out Wednesday) to see whether it has been affected by the latest bout of turmoil in share markets.
The TD Securities Inflation Gauge (later today) is likely to confirm that inflation remains low and industry new home sales data (on Thursday) will also be released.
And besides the quarterly and yearly reports from those major miners (see above) we can expect smaller mining groups to start releasing their reports for the December quarter.
