It will be another busy week for investors here and offshore with the latest meeting of the US Federal Reserve, the peak week for US second quarter earnings, Australian inflation data for the June quarter and to kick off the week, a major speech later today from Reserve Bank Governor, Phillip Lowe.
In Australia Dr Lowe’s speech is entitled The Labour Market and monetary policy and will build on the speeches on Friday by Deputy Governor, Guy Debelle who discussed the influence of overseas events on monetary policy, and a separate speech from Michelle Bullock, the RBA’s Assistant Governor overseeing the financial system who examined the question of the big banks and financial stability.
Dr Debelle told the markets that interest rates are not going to rise any time soon and that the ’neutral interest rate’ discussion at the July board meeting of the bank was just that, a discussion and nothing more – his remarks dropped the dollar by three quarters of a cent.
And Dr Bullock said there were concerns about banks and house prices, as there always are, but banks are safer (but risky) after the new capital standards from APRA.
The RBA’s minutes for July changed the emphasis for the central banks policymakers, giving offshore events in the US, Europe almost as much weight as the two biggest policy questions – the health of the labour market and house prices (therefore bank risks and property prices).
Dr Debelle addressed the offshore factors and their influence on the RBA, Dr Bullock examined banks, housing and risk, and later today Dr Lowe will pull together the labour market and monetary policy.
The June jobs figures again underlined the strength of the recovery in the jobs market, especially full time work, but the RBA (and millions of workers) remain concerned about the weakness of wages. Dr Lowe famously told workers to ask their bosses for a big pay rise in remarks last month at an economic conference in Canberra.
The consumer inflation data from the Australian Bureau of Statistics (ABS) for the June quarter on Wednesday won’t make any difference to the RBA’s thinking if there is a fall – as we saw in New Zealand in the three months to June and have seen in monthly data for June in the US, Europe and the UK.
But most economists are looking for a quarter on quarter rate of 0.4% to 0.6% and an annual rate of around 2% to 2.4% with the big question whether the impact of Cyclone Debbie on fruit and vegetable prices is offset by falling oil and petrol prices.
Producer price figures will be issued on Friday by the ABS.
The Australian June 30 results season continues its slow burn with Australian Foundation, the country’s largest listed investment company releasing its 2016-17 figures, and GUD Holdings on Thursday.
Quarterly production reports will come from Newcrest today and Fortescue Metals on Thursday, and Macquarie Group holds its annual meeting midweek.
In the US, the focus will be on the Federal Reserve’s meeting on Wednesday, but given the recent softness in inflation readings and in some data releases it’s not likely to make any changes to monetary policy.
It may flag again that an announcement to start letting its balance sheet run down will be made soon – September is the best tip from US analysts for an announcement..
Besides the Fed meeting the other big event for US markets this week is the first estimate (and the least accurate) of GDP for the June quarter.
Economists are looking for a rebound after the seasonally weak March quarter., but it won’t be much given the weak retail sales data.
July business conditions data out tonight should be healthy, house and consumer confidence both tomorrow night, our time, durable goods orders on Thursday and June quarter employment cost data on Friday night, our time.
The US earnings reporting season will also ramp up with close to 200 S&P 500 companies reporting (see separate story).
And Tesla is due to release its new model 3 vehicle on Friday night, our time.
In Europe Wednesday sees the release of June quarter GD estimates – a small rise of 0.3% quarter on quarter is forecast and growth of 1.7% on an annual basis.
Early second quarter GDP data for Spain and France will also be released.
Eurozone business conditions PMIs will also be released Monday and economic confidence data will be released Friday and both are likely to remain strong.
Also for UK investors to fret over will be the post Brexit trade-talks between the US and UK scheduled for later today.
In Asia, Friday also sees the release of the usual end of month data from Japan. There will be labour market figures (solid0, household spending and inflation 9zero for core inflation and negative for headline figures).
Expect Japanese data to be released Friday to show continued labour market strength, some improvement in household spending but core inflation remaining around zero.
GDP reports for South Korea and Taiwan will also be released.
And outside business, in the US Donald Trump Jr., the president’s son and Paul Manafort, the president’s former campaign manager, are expected to testify before the Senate Judiciary Committee on Wednesday night, Sydney time. That could very well overshadow the Fed’s post-meeting statement.
