It’s another one of the those first week’s of the month conjunction of events and data for markets to fret over.
The US jobs data for July will be out Friday night our time and will be the week’s biggest data release, but in Australia it will be the Reserve Bank board meeting tomorrow and an another sit and hold decision on interest rates.
Globally, there is the start of month surveys of manufacturing and service sector activity from the major economies and the June 30 reporting seasons continuing in the US, Europe and Asia, and in Australia where we are about to hit the peak weeks.
And overlaying all of this is the continuing instability in the US as President Donald Trump continues to prove he is unable to govern or lead.
In Australia, the Reserve Bank will leave interest rates on hold for the 12th month in a row – speeches by Governor Phil Lowe and deputy Guy Debelle in the past 10 days have made it clear the bank has no interest at the moment of changing its monetary policy stance.
While economic growth indicators have improved over the last few months and business confidence and jobs growth are solid, consumer spending remains weak, housing construction is slowing, and as we also saw last week, inflation remains below target and is likely to remain so for longer given record low wages growth and the stronger $A.
The AMP’s Chief Economist, Dr Shane Oliver says that “as a result, the RBA is expected to remain on hold and reasonably neutral with respect to the outlook.”
The RBA stance will be further explained in the third quarterly Statement on Monetary Policy of the year to be released on Friday.
Dr Oliver sees no change in rates until “late 2018 at least.” That is a big change in belief because for much of the past year he thought the bank might have to cut rates one more time because of weak growth, jobs and inflation
The Australian start of month data flow resumes with monthly house price data out tomorrow, and reports from the Australian Bureau of Statistics on building approvals, trade and retail sales (all for June and for 2016-17).
Tuesday also sees the start of the month survey of manufacturing activity with another solid expansion expected.
Car sales data for July will be issued later in the week.
The June 30 reporting season steps up this week (see separate story) – watch for the half year result from Rio Tinto.
In the US, the focus will be on July jobs report – economists seem to be saying there will be another 180,000 new jobs created, with the jobless rate dipping to 4.3% again (as it was in May). But watch for the wages data – it is likely to remain around an annual rate of 2.5%.
The July report on US manufacturing activity is out Tuesday night (our time) for the US which is expected to remain strong at around 56.
US June quarter earnings results will also continue to flow with around 130 companies reporting – watch for Apple’s release early Wednesday morning, our time, and Berkshire Hathaway’s early Saturday morning, our time.
US car sales data for July will be out tomorrow night, our time.
In the eurozone it’s a big week with the Brexit talks with Britain continuing core inflation tonight for July (weak at around 1.1% year on year) and the flash report on June quarter GDP data (tomorrow night, our time) expected to show a pickup in growth to an annual 2.2%. Unemployment for July is expected to show another improvement when released tonight, our time.
In Britain, the Bank of England’s Monetary Policy Committee meets and will release its updated forecasts on Thursday night, our time.
Markit says "The lacklustre performance of the UK economy in the first half of this year seems to have diminished the likelihood of an interest rate hike any time soon, especially as growth prospects have become increasingly gloomy. Preliminary official data showed that the UK economy expanded at a meagre rate of 0.3% during the second quarter.”
In Asia, Japanese industrial production for June later today is expected to show a decent bounce after a fall in May. Japan’s survey of manufacturing activity should also show a solid performance.
China’s two business conditions surveys will be released today and tomorrow and are expected to show that business conditions remain consistent with growth remaining around 6.5-7%.
