It will be another week dominated by COVID-19 cases around the world, the reaction to them from markets and panicking consumers hellbent on owning years and years supplies of toilet paper, dry pasta, rice, and UHT milk.
While some joke that the mad panic buying might boost retail sales, it will be temporary because it is pull forward sales and consumers will be oversupplied with these and other bulk-bought products for months to come.
And while supermarket shares did well last week here and offshore, the share prices of other retailers were pounded lower in the expectation that the virus would hit their sales.
Likewise, shale oil and other speccie miners and tech stocks will be badly damaged if the virus dries up sources of short term finance they all seem to live off.
The extraordinary nature of current events was shown up by the very strong 273,000 new jobs created in the US in February and the extra 95,000 in January and March.
That normally would have ended all talk of another rate cut this year from the Fed, but instead, we got an emergency 0.50% chop on Tuesday.
This week it will be the European Central Bank’s (ECB) turn to tell markets if it is going to follow the Fed, the Reserve Bank of Australia, the Bank of Canada and several other central banks and loosen monetary policy to help cushion economies against the expected damage COVID-19 could do to business, sales, cash flows, employment and confidence.
The AMP’s Dr. Shane Oliver says the ECB, which meets on Thursday, “as expected to undertake further monetary easing to combat the impact of coronavirus – this may include another rate cut but with rates already negative the focus may be more on boosting liquidity and credit such as enhancing the cheap funding for lending scheme (TLTRO) and expanded quantitative easing.”
Still in Europe and there’s some key data out of Germany which will add insight into the health of the eurozone’s largest industrial sector at the start of the year (industrial orders last week were better than forecast), while in the UK, the government sets out its post-Brexit spending and tax plans in its Spring Budget which is expected to be a spendathon.
In the US, there’s small business confidence tonight, consumer price inflation mid-week (with core inflation expected to remain around 2.3% a year, and a few quarterly earnings reports.
Chinese CPI inflation for February is likely to fall back to around 5% year on year helped by fuel price declines with core inflation remaining benign at around 1.5% year on year. The big imponderable is what happens to pork prices which have driven headline consumer inflation higher for the past year.
In Australia, we should expect coronavirus concerns to depress both the NAB business survey results for February (tomorrow) and the Westpac/MI consumer survey results for March (Wednesday).
Housing finance commitments data for January (Wednesday) are expected to show a further rise.
And Reserve Bank Deputy Governor, Guy Debelle makes a speech on Wednesday (before markets open) that will be widely watched for his comments on the economy and the virus.
He told Senate Estimates last week that the virus would cut at least 0.50% from GDP on top of a 0.2% drop from the bushfires.
