A busy week ahead with trading to be dominated by China’s June quarter and monthly economic data, a possible rate cut in Britain amid the continuing post-Brexit strains in the markets, Australia’s June jobs report and the start of the US second quarter profit reporting season.
With the US job’s report for June showing a surprisingly high 287,000 new gigs created last month, investors are starting to think about the timing of the next rate rise from the Fed being sooner rather than later.
But there is every chance that the Bank of England could spring a rate cut (to either a quarter of an 0.25%, or 0.5% to zero) at its July meeting on Thursday night, our time.
With sterling falling to a series of 31-year lows against the US dollar (but a smaller fall on the trade weighted index), economic uncertainty rising and factor and services data showing the economy slowed almost to a halt last month, expectations have risen for a rate cut this week from the Bank of England.
The Bank last week warned that “Brexit risks have begun to crystallise” and that “the current outlook for UK financial stability is challenging” as it allowed banks to start cutting their capital buffers so as to be able to maintain lending to businesses and consumers in coming months.
In China, the June quarter GDP report on Friday is likely to show a softening in growth to 6.6% a year from 6.7%. Economists think the quarter on quarter growth will be a bit stronger in the three months to June.
Export and import data will also be released and data for industrial production on Wednesday, while retail sales and investment (the housing figures will be closely watched) may show a slight slowing.
Elsewhere in Asia, there’s production data out in Japan midweek, and from India tomorrow.
In Australia, the June jobs report dominates the week and will feed into the August board meeting of the RBA which is widely expected to cut the cash rate to 1.5%. Economists are looking for around 10,000 new jobs to have been created, with the unemployment rate edging up to 5.8% from 5.7% in May.
As well, there’s housing finance data for May out later today (a small fall is tipped), the monthly business conditions and confidence surveys from the NAB tomorrow (little change is forecast) and consumer confidence will probably dip (out Wednesday) thanks to the run up to the July 2 poll.
In the US, the start of the second quarter earnings season is another major event for markets to mull over.
Corporate America’s earnings recession is expected to have continued in the three months to June 30 with the S&P 500 companies forecast to report its fourth straight quarter of earnings decline (according to Thomson Reuters, FactSet and S&P Global Intelligence).
Alcoa is poised to kick off earnings season early tomorrow, Australian time, while JP Morgan is the first big US bank to report results on Thursday, followed by Citigroup and Wells Fargo on Friday.
In addition to that there’s the Fed’s Beige Book which collects anecdotal evidence on the state of the US economy from 12 regional branches of the Federal Reserve, alongside retail sales, industrial production and consumer sentiment data.
But the figure that will be closely studied will be the consumer price data on Friday night (our time) to see if there are continuing signs of a rise in cost pressures in the US economy.
Canada’s central bank releases its latest monetary policy decision midweek.
While the Bank of England’s meeting (and market events) will dominate Europe, in the eurozone there’s industrial production and trade numbers out on Wednesday.
