A trio of central banks will dominate affairs this week so far as investors are concerned here, across the Tasman and in India. While the December 2016 earnings season continues here, in Europe and Asia, and starts easing in the US.
Other central banks meeting include Thailand’s and Mexico’s whose response to the growing brawl with the Trump administration will be watched closely, as will any comments by the bank after the meeting.
In Australia, the focus will be back on the RBA’s first meeting of the year (Tuesday) and the first Statement of Monetary Policy on Friday where new economic forecasts will be outlined.
Economists say it’s unlikely to make any changes to interest rates. The RBNZ should follow Australia and not change rates, while the Reserve Bank of India is seen also doing nothing.
While the low Australia December quarter inflation reading leaves the door wide open for another rate cut, such a move on Tuesday won’t happen.
The inflation outcome was in line with the RBA’s own forecast and its likely to want to monitor the recent uptick in lending to property investors and see how the economy performs after its September quarter 0.5% growth slump.
The AMP’s chief economist, Dr Shane Oliver says that "As a result all eyes will be on the post meeting Statement and the Statement on Monetary Policy to be released Friday. Of most interest will be any revisions to the RBA’s forecasts, where we expect a downwards revision to the growth forecasts following the September quarter growth contraction and a possible pushing out in the return of inflation to target.”
“Our assessment remains that – with record low wages growth, ongoing spare capacity, an increasing risk that low inflation will feed on itself and the $A remaining too high – the RBA will cut rates again around May.
“Also of interest will be what the RBA has to say about the resurgent Sydney and Melbourne property markets – are they embarking on another round of discussions with APRA?" he asked in a note at the weekend.
On the data front in Australia, he says we can expect a 0.2% rise in December retail sales and a 0.8% rise in retail sales volumes for the December quarter (both today) and 0.5% rise in December housing finance (on Friday) again driven by property investors.
The December half year and 2016 full year reporting season step up this week and among those issuing reports the NAB and Macquarie Group have quarterly trading updates today and tomorrow respectively.
Rio Tinto releases its full year figures Wednesday and the troubled AMP issues its full year results on Thursday.
AGL Energy, Suncorp and Transurban are the most notable companies issuing half year figures this week.
In NZ, the country’s Reserve Bank is expected to follow the RBA and sit on its hands on Thursday and not move rates.
The announcement will fuel talk about the country’s solid economic performance and suggest that like Australia, there are no more rate cuts in the offing. Property prices (like Australia) will remain a concern.
In the US the reporting season continues with around 80 S&P 500 companies due to release quarterly figures. Twitter’s figures on February 9 will be watched very closely.
On the data front it will be pretty quiet with US December trade data (Tuesday) night expected to show an unchanged deficit (watch for President trump to play up this figure) and consumer sentiment and import price data due Friday.
Japan’s PM, Shinzo Abe visits the US from Friday.
In Europe a three day UK debate on Brexit will be held this week.
The Reserve Bank of India will determine its next course of monetary policy during the week, with analysts pencilling-in a reduction in the benchmark repo rate from 6.25%. The Indian economy is still recovering from the government’s shock decision to introduce demonetisation back in November
Chinese trade data for January on Friday is expected to show a strengthening in import growth and a return to positive growth for exports.
The question of volumes of imports of iron ore, copper, oil, soybeans and coal will again be of interest to Australian investors, government and analysts.
