It is going to be another of those big weeks for markets, economies and investors around the world with a series of central bank, statistics and government decisions set to impact sentiment.
In Australia the major event is the Reserve Bank’s August meeting tomorrow; in the UK it will be the Bank of England decision on Thursday night which could see an interest rate cut; in Japan it is the detail of the 28 trillion yen stimulus package from the Abe government expected tomorrow, while in the US it will be the July jobs report on Friday night our time and its possible impact on Federal Reserve thinking.
On top of this there are the usual start of month reports on the health of global manufacturing today, and later in the week the health of the global services sector.
The two reports for China’s huge manufacturing sector will be watched closely, while those for the eurozone and the will also be scrutinised after weaker than expected second quarter GDP reports raised questions about whether the economies were going.
And there will be more corporate profit report for the second quarter, half year or 2015-16 financial year to June 30 (in the case of Australia).
Looking at Australia, the Reserve Bank tomorrow is widely tipped to cut the cash rate again by another 0.25% taking it to a new record low of 1.5%.
The AMP’s Chief Economist, Dr Shane Oliver wrote at the weekend “The June quarter inflation data is not low enough to make an RBA rate cut certain particularly given that recent economic data has been reasonably good."
"However, on balance we expect that the RBA will cut again to help ensure that inflation expectations do not become entrenched below 2%, so that there is reasonable confidence that inflation will move back into the target zone in a reasonable time frame and to head off a rebound in the $A. Alternatively if the RBA does not cut again on Tuesday, then expect an easing in November,” Dr Oliver wrote.
And this Friday sees the release of the RBA’s third Statement on Monetary Policy for the year with new staff forecasts for the economy – only small changes are expected to its growth and inflation forecasts.
So far as data releases are concerned, there’s the usual start of the month figures on house prices from CoreLogic data.
Dr Oliver says we can expect that report to show a further loss of momentum in Sydney and Melbourne home prices. And there’s also the Bureau of Statistics figures for June building approvals, the June trade deficit and retail sales for June as well.
As well there’s the July car sales data later in the week and new home sales as well.
And the June 30 reporting season starts with the biggest, the half year figures for Rio Tinto out on Wednesday.
In the US, the jobs report for July (on Friday night, our time) is expected to reveal around 180,000 new jobs, according to Dr Oliver and other forecasters. US unemployment will remain around 4.9% and a slight edging up in wages growth from 2.6% year on year.
Meanwhile the manufacturing conditions index is out tonight, our time, the Fed’s favourite measure of prices and other activity – the personal core private consumption, expenditure and inflation measures out tomorrow night. (Tuesday night, our time).
Wednesday sees the release of the monthly survey of service sector activity.
And the June quarter corporate earnings is over last week’s peak and starting to subside, but a number of important US media groups are reporting, along with a couple of big global banks and European and Japanese manufacturers.
And tomorrow’s Japanese Government 28 trillion yen stimulus package will be the high point – especially as economists try to work out how much new spending is involved, and how much existing spending plans are recycled, as the government has done in the past. The monthly surveys of manufacturing and services will also be out this week.
In China, its the two manufacturing surveys that will hold attention and are expected to show a modest improvement, but nothing more.
In the UK, the Bank of England is widely expected to reveal a rate cut and other measures to help the economy resist the impact of the Brexit induced slowdown. These decisions will be out on Thursday night.
The bank resisted making these moves three weeks ago, but UK commentary has some sort of announcement as an almost certainty this week.
