The coming week will focus on the US-North Korea summit in Hanoi midweek, Brexit, some important economic data, the Fed chair’s testimony and Friday’s March 1 deadline for a deal between the US and China on trade tariffs.
In Australia, there’s the start of data releases ahead of the 4th quarter GDP report next month, including business investment, plus the final week of the December half earnings season.
Of the Kim summit and the China trade talks, the latter are by far the more important with their capacity to move markets (especially in Australia).
The Kim-Trump talks are just a continuation of the inconclusive Singapore talks from last year and will go nowhere according to most experts because North Korea will refuse to ‘denuclearise’.
President Trump had set a March 1 deadline for Beijing to agree on a deal on trade, or face an increase in tariffs on $US200 billion of Chinese imports.
On Friday, Trump said he was open to pushing that deadline back as long as progress was being made. Negotiations between the two sides will continue over the coming days. Markets reckon the chances of a deal are growing.
UK Prime Minister Theresa May is slated to make a statement to parliament on tomorrow night, our time, explaining how much progress she has made with the EU regarding changes to the exit deal she agreed with the bloc last year.
The House of Commons will then debate the issue the following day. Many in Mrs. May’s Conservative party are concerned about the prospect of the UK leaving the EU without a deal on March 29. The party split last week, as did the Labour opposition on the issue.
Fed chair Jay Powell makes his semi-annual appearance before the Senate Banking Committee on Tuesday night, our time, and will discuss the state of the US economy.
The minutes from the Fed’s January meeting showed it saw growing downside risks to global growth, and that it saw little risk from keeping interest rates steady for a time.
The Fed also told the US Congress that it will not be cutting the size of its huge balance sheet to the levels it was before the GFC, a move that was hailed as ending the fears of a severe contraction in monetary policy.
The first reading of US 4th quarter GDP will be issued on Thursday. The first was missed because of Trump’s government shutdown.
The AMP’s Chief Economist, Dr. Shane Oliver expects US GDP growth will have slowed to 2% from 3.5% in the third quarter and 4.2% in the June period.
Consumer confidence, housing starts, and February manufacturing conditions index will be issued on Friday, March 1, along with similar releases around the globe.
The US core private consumption measure of inflation for December (also due Friday) is expected to remain unchanged at 1.9% year on year.
The US 4th quarter of 2018 earnings season continues to wind down – this week it will be dominated by retailers such as Macy’s and Dillard’s.
In the Eurozone data is expected to show unemployment remaining unchanged at 7.9% in January and core inflation for February (both due out on Friday) remaining around 1.1% annual.
Economic confidence data for February is due Thursday and manufacturing conditions surveys for February on Friday.
Japanese industrial production data for January (Thursday) is expected to rise slightly and labour market data (Friday) is expected to remain strong helped by the shrinking workforce.
China’s surveys of manufacturing and services will be closely watched on Thursday and Friday (there are two surveys – the official one is out Thursday, the private survey will be issued on Friday).
All will be watched to see if manufacturing activity has risen back above the 50 reading which is the difference between contraction (below) and expansion. It has been in contraction now for two months.
In Australia, we have the start of data releases leading up to the 4th quarter and 2018 GDP figures (due out a week from this Wednesday). There’s the December quarter construction data on Wednesday (it could show a gain of 0.7% according to the AMP’s Dr. Oliver).
He also says that the December quarter private investment data on Thursday) could show a rise of 0.8% with capex intentions also improving. There’s also credit growth data for January from the Reserve Bank on Thursday and Friday sees the release of the CoreLogic house price data for February which Dr. Oliver expects is to show a further decline.
The Australian December half earnings results season will wraps up this week with 43 major companies reporting including Harvey Norman, Boral, Lendlease and QBE, Caltex, Rio Tinto and Seek and Ramsay Health Care.
