A testing week ahead for markets – there are quite a few events (such as Australian interest rates and GDP, Chinese trade figures, US data such as oil production data, a meeting of the European Central Bank and the UK elections on Thursday night, our time) to test the sentiment of investors large and small.
In Australia, the Reserve Bank is likely to leave interest rates on hold for the tenth month in a row at tomorrow’s board meeting, but the March quarter GDP figures on Wednesday are likely to generate a lot of heat and light if they are as low as many economists expect them to be.
And watch for the bank to be conservative on its efforts to slow the Sydney and Melbourne property markets and the recent strength in employment and business surveys. It will simply say that monetary policy will remain accommodative for now.
But the bank is likely to again make it clear that it is closely watching the labour and housing markets, as well as consumer spending which has turned down in the past few months.
On the data front in Australia, the focus will be on the March quarter National Accounts and GDP data to be released Wednesday.
Some economists say there is a chance there could be a negatve reading of around 0.1% (or even no growth at all), others say it could be around 0.3%. The AMP’s chief economist, Dr Shane Oliver says it could be a very low 0.1%, or an annual rate of 1.5%.
He said that if that’s the reading them it will be “ hanks to a combination of weak consumer spending, a fall in housing investment and a detraction to growth from trade.”
But data on sales, profits and inventories (out today) and government spending and the current account – net exports – (out tomorrow) will help firm up GDP forecast.
Dr Oliver says that; “net exports are expected to be weak but public demand growth should be positive.”
The trade surplus for April (out Thursday) will likely to show a sharp fall thanks to the impact of Cyclone Debbie on coal exports but this should reverse in May.
Housing finance data for April (Friday) is likely to show a further decline, according to Dr Oliver.
Chinese trade data for May is out Thursday and is forecast to show export growth slowing to 7% year on year and import growth slowing to 9%.
And consumer and producer inflation figures also for May will be issued on Friday and won’t show much in the way of change from April.
Dr Oliver forecasts that CPI inflation is likely to have risen to 1.4% (annual), but producer price inflation is likely to slow to an annual rate of 5.5%.
The UK election (Thursday) has turned is now a more interesting affair with the Conservative Government’s poll lead shrinking in the past week.
Dr Oliver says “The most likely scenario remains that the Tories are returned with some increase in seats which would have little bearing on Brexit.”
"Alternatively if Labour wins Brexit may turn out to be softer, but expect to see a return to a pre Thatcher world of far great government involvement in the economy which will not augur well for productivity (oddly at a time when the French are going in the opposite direction).
“Either way there are likely to be minimal implications for the global economy or Europe which since the Brexit vote has moved against populism,” he wrote on the weekend.
In the US, the non-manufacturing conditions survey report (out tonight) is forecast to to remain strong and job openings and hiring (out tomorrow) to remain solid.
Apple starts its week-long Worldwide Developers Conference in San Jose, California tonight, our time.
Analysts say the company is expected to talk up Siri, its voice-controlled personal assistant with Chief executive Tim Cook expected to reveal new devices to compete with Amazon’s Echo and Google’s Home.
Apple could also reveal some details of the iPhone 8, due later in the year and three new lap top models.
The big news in the US though will be testimony to Congress on Thursday night, our time, by former FBI chief James Comey – although there are reports President trump might try legal moves to stop him
On Thursday night, the European Central Bank is expected to leave monetary policy on hold, even though the eurozone and EU economies are on the improve with inflation under control, unemployment falling, stock markets doing well and growth on the rise.
The third estimate of March quarter GDP for the euro area is out on Wednesday.
In Asia the final estimate of Japan’s March quarter GDP will be released on Thursday.
