Diary: Watch Macquarie

After the Federal Budget last week and its aftermath, it will be a less frenetic week here for the economy with only a couple of important statistics for release.

The Westpac-Melbourne Institute’s consumer confidence survey will provide some guide as to how the Budget was received by consumers, while there will be a couple of housing releases from the Housing Industry Association that will underline the downturn in the industry and the growing affordability problem.

But the highlight for local investors will be the Macquarie Group financial results tomorrow that will show  slower earnings growth, as expected, but not the disaster that many people though might emerge from the impact of the credit crunch on our largest and most aggressive investment bank.

The earnings release and outlook will also coincide with a changing of the guard in the CEO’s role with Alan Moss stepping down to be replaced by Nick Moore. The change was announced earlier this year and has been happening progressively and the change tomorrow will be more symbolic than anything.

But it will be a test of the standing of the Macquarie Group in the market with the retirement of the widely respected (and highly paid) Mr Moss and his replacement with Mr Moore who has been seen as a more aggressive style of manager.

Macquarie though has been cutting and changing its operations to accommodate the pressures from the crunch: it has existed non-bank lending for mortgages in Australia; it has made a couple of low key deals in the US, Europe and Asia, but it hasn’t revealed a major coup for some months as it did in 2006-07.

The Sigma Pharmaceuticals AGM on Thursday will hopefully see more information released on the company’s interest, with Metcash, in the consumer and wholesaling business of Symbion Health Care, which was taken over by Primary Health Care recently.

Lihir Gold’s AGM later in the week will see an update on first half earnings and production.

The Minutes from the RBA’s last rate setting meeting are likely to confirm the message that interest rates are on hold for now, but that the risks are still on the upside.

In the US there’s a bigger week with the latest data for producer prices, a leading index, house prices and home sales all due for release. Oil prices will be a major factor again as they moved over $US127 a barrel briefly on Friday before retreating.

With the US economy still on shaky ground, and inflation back in the frame, investors will read the minutes from the Fed’s last policy-setting meeting, due to be released on Wednesday, a lot more closely to find out if the outlook for interest rates has changed.

There was a suggestion of a pause in rate cutting in the statement after the rate cut on April 30, and a number of senior Fed members have dragged inflation back to centre stage by talking about it in speeches, especially last week.

Certainly US bond rates have moved up, especially at the short end, and economists now say the yield curve is looking at a rate rise as the next move, not a rate cut. In contrast the yield curve in Europe is still inverted, suggesting markets there believe the economy is going to slow, despite a surprise acceleration in German economic growth in recent months.

Apart from the Fed minutes, investors will hear from three Federal Reserve Board governors — Donald Kohn on Tuesday, Kevin Warsh on Wednesday and Randall Kroszner on Thursday while Federal Reserve Bank of Chicago President Charles Evans will speak at an event on Friday. So expect more ‘jawboning’.