The week ahead will be dominated by US inflation and earnings, Australian earnings – led by the report from the Commonwealth Bank on Wednesday, Chinese trade and inflation data for July and the continuing political instability in Washington.
After the strong (209,000 new jobs) US jobs report for July (jobless rate down to 4.3% for the second time in three months, a 16 year low), don’t expect a weakish inflation report for last month this week to dissuade the US Federal Reserve from sticking up rates again this year.
Wage growth was unchanged at 2.5% a year. The September Fed meeting might be too early, but there will be a rate rise by the end of the year, and the Fed will start reducing the size of its balance sheet by unwinding its huge quantitative easing program.
This week’s consumer and producer price inflation data is expected to remain weak at well under the 2% target level of the Fed.
The Fed’s preferred personal consumption core inflation measure was unchanged in June at 1.5%, but this weakness will be ignored by the central bank.
The US June quarter earnings results continues with major retailers led by a group of department stores (such as Macy’s) reporting late in the week, as well as a group of media companies led by CBS, Disney, 21st Century Fox and News Corp.
In Asia the usual monthly data drop in China starts with July trade figures (another sold month) out tomorrow, followed by consumer and producer price inflation data, also for for July on Wednesday. Both are expected to be weak. Money supply and lending data will also be released, as well as car sales figures.
In Australia, Parliamentary testimony by Reserve Bank Governor Phillip Lowe on Friday will be watched for further clues on the interest rate outlook but is unlikely to add much to the the latest Statement on Monetary Policy released on Friday.
Before then the July NAB business survey (out tomorrow) is forecast to show continued solid business conditions and confidence while consumer confidence to remain subdued according to the Westpac consumer confidence survey (Wednesday). Housing finance data (also Wednesday) is expected to show a small gain June.
The August profit reporting season will start to ramp up in the week ahead with around 15 major companies reporting including Cochlear, CBA, AMP, Orora and AGL (see separate story).
Across the Tasman, the Reserve Bank of NZ releases its monetary policy decision – no movement in rates is expected.
Elsewhere second quarter GDP numbers are out for two of the world’s largest emerging markets: Russia (Friday) and Indonesia (today). Russia will be OK without being brilliant (and heavily dependant on oil) while Indonesia’s report will be weak.
Second quarter GDP reports will also be issued by Singapore and Hong Kong on Friday.
