It is going to be a very busy week for markets everywhere.
The Reserve Bank and its Kiwi counterpart, the RBNZ will yet again leave interest rates on hold when they release announcements on Tuesday and Thursday respectively.
Tuesday also sees the Melbourne Cup, the US mid-term polls (reported on Wednesday) and the second last meeting of the US Federal Reserve for 2018 and statement early Thursday.
We also have earnings for the September quarter – Westpac’s 2017-18 figures are out this morning, plus a Commonwealth Bank update midweek, and some major earnings releases in the US, Europe, and Asia.
There’s the official start of the US oil and other sanctions against Iran tonight.
And Chinese economic data for October starts flowing later in the week.
In Australia, the RBA meeting tomorrow will not see a change in interest rates but watch for a mention of updated forecasts for the rest of 2018 and 2019 that will be released on Friday in the 4th Statement on Monetary Policy for the year.
The AMP’s Chief Economist, Dr Shane Oliver wrote in a weekend note that “While recent news on unemployment coming on the back of news of above-trend economic growth is good, the slide in home prices risks accelerating as banks tighten lending standards which in turn threatens consumer spending and wider economic growth, and inflation and wages growth remain low.”
“As a result, it would be dangerous to raise rates and we don’t see the RBA hiking until 2020 at the earliest and still can’t rule out the next move being a cut.”
He says Friday’s Monetary Policy statement “is likely to raise its near-term growth forecasts and lower its unemployment and underlying inflation forecasts a bit but won’t signal any imminent move on interest rates”
“It will be mostly watched for its commentary around risks to house prices & credit growth and inflation & wages,” Dr. Oliver wrote.
ANZ job ads data will be released today and housing finance data (Friday) will likely show continuing weakness in lending, particularly to investors. October car sales data from the industry will be released mid-week.
And it will be a similar story for the Reserve Bank of New Zealand which releases its interest rate decision and monetary policy statement on Thursday.
Like the RBA, the Kiwi central bank is seen waiting until 2020 at the earliest to move on rates – it even won’t hint as the RBA has been doing, that the next rate move looks like being up.
In the US its all about the mid-term Congressional elections on Tuesday night and Wednesday, our time where polls and betting markets point to the Democrats taking control of the House of Representatives but Republicans retaining control of the Senate (because more Democratic Senate seats are up for grabs).
Dr. Oliver says “such an outcome should already be factored into financial markets, but it may create increased uncertainty about the impeachment of Trump and policy direction.”
“While a Democrat House may attempt to bring impeachment charges against Trump its most unlikely to get the 67 Senate votes required to remove him from office and while a Democrat House will likely prevent another round of Trump tax cuts it won’t be able to roll back already legislated tax cuts and won’t change Trump’s policies around deregulation and tariffs.”
Dr Oliver says the Fed on Thursday morning Sydney time “is expected to acknowledge various risks to the outlook around trade, emerging markets, and recent financial turbulence but indicate confidence in its base case of continuing solid growth and low unemployment and that continuing gradual rate hikes remain appropriate with the next hike on track for December.”
That is especially so after the solid October jobs report of 250,000 new positions created and wages rising at an annual 3.1% – the first time wage growth has been above 3% since 2009.
On the US data front the non-manufacturing survey result for October is out tonight is likely to slip back to a still very strong reading of 60, job openings and hiring (tomorrow night ) are likely to remain strong and core producer price inflation (Friday) is expected to remain at 2.5% year on year.
The third quarter the US earning season slows again this week with around 70 S&P 500 companies reporting – see separate story.
China’s October trade data will be out on Thursday and could show a slowing in export growth to 12% year on year (from 14.5%) and import growth to around 10%yoy (from 14.3%), according to Dr. Oliver.
Watch for figures on imports of iron ore, LNG, coal, copper, and oil to tell us just how imports and demand are going, and exports of steel, computer bits, and bobs and aluminum.
Chinese consumer price inflation (issued on Friday) is expected to remain around 2.5% annual, with producer prices also soft.
The EU Commission will publish its quarterly economic forecasts on Thursday for the 28 EU member countries – including Britain, which is due to leave the bloc in March – and for the eurozone as a whole.
The forecasts will come after a report last week showed the eurozone economy grew only half as much expected in the third quarter. The preliminary estimate of 0.2% was also half the 0.4% seen in Q2 and was the slowest pace of growth in more than four years.
In its last forecasts in July, the Commission said it expected the 19-country eurozone to grow by 2.1% in 2018, slower than the 2.4% in 2017, and by 2.0% next year.
With Brexit less than six months away, Britain will release its own third-quarter growth estimate on Friday, with a 0.4% expansion the consensus forecast. The Bank of England last week said that if Brexit is done peacefully without too much fuss, there will be at least three rate rises in 2019 and 2020.
Don’t be surprised if a settlement of Brexit emerges this week from talks between the EU and UK, but then the hard work starts with the parliamentary debate and brawl.
The 100th anniversary of the 1918 armistice will be marked this week with world leaders visiting France. President Trump will visit Paris to participate in an event commemorating the centenary of the end of first world war. Later, Mr. Trump is expected to briefly meet Russian President Vladimir Putin on the sidelines of an Armistice Day celebration on November 11.
