Attention for investors here will be on the market financials like the banks, June 30 companies reporting and the Reserve Bank board meeting tomorrow, but we should also not take our eye off the US Federal Reserve’s interest rate decision early Wednesday morning, our time.
There are also corporate reports in the US, Europe and Britain that could influence markets, while some important statistics will also be released and could influence markets, especially our jobs numbers for July on Thursday.
All in all it will be another week of volatility for investors to contend with.It was a year ago this Tuesday that the RBA lifted interest rates to 6.50%; that was the start of four increases that the credit crunch later turned into at least six, or 1.50% or more on mortgage and other rates.
Here we have the Reserve Bank board meeting tomorrow: no change is expected. The Fed tomorrow night, our time and the Bank of England and the European Central Bank on Thursday night, our time.
After the flood of poor economic news in Australia last week, there’s a small chance of a cut here, but not much.
What will be interesting is whether there’s a change in its post meeting statement to signal that an easing is in the offing.
The money market has already priced in a 20% chance of an RBA cash rate cut on Tuesday and a 90% probability of a move by October, with two cuts by next February.
Australian statistics due for release include the June quarter and 2007-08 financial year house price index, and job ads today, housing finance and employment and unemployment figures for July on Thursday.
Unemployment could show a small rise to partly reverse the surprise jump in the number of new jobs in June.
The June full year and half year profit reporting season will also start to kick off with stocks such as AXA, Seven network, News Corp and West Australian News due to report.
The AMP’s Dr Shane Oliver says his group expects overall profit growth for 2007-08 to come in pretty weak at around +3%, down from +15% in the previous financial year.
"The economic back drop to this reporting season is the toughest since 2000-01 as growth has slowed sharply and costs have picked up. All sectors, including resources which have been hit by rising costs, are likely to report soft results for 2007-08.
"However, while the results are unlikely to be the disaster the market is currently priced for after its 30% slump from last year’s high, the focus over the next few weeks of the reporting season is likely to be on the outlook statements released by companies and these are likely to be disappointing.
"While market expectations for 60% growth from resources in 2008-09 are reasonable given the latest surge in coal and iron ore prices, consensus expectations for 5 to 10% growth in the rest of the market are likely way too strong and will be revised down." he wrote.
After Friday’s shock earnings downgrade from insurer and bank, Suncorp Metway, anything is possible.
Important results this week will include transport and infrastructure operator, Asciano.
It’s been a constant mention as a possible victim of the credit crunch and had to abandon a stalking takeover attempt of Brambles at a big loss.
Its shares have risen recently, so perhaps the company might be out of trouble. Its price has bounced from less than $3 a share to $4.15 close on Friday. The shares rose 71 cents alone last week!
Media groups, News Corp, Seven Network and West Australian Newspapers all release final profit this week. Seven is stalking WAN and recently lifted its stake to over 22% in a major creep up the register.
News Corp’s newspaper operations in the US and Britain will take a hit and some analysts believe its US Pay TV, film and TV business may also be hurt by indifferent performance and falling consumer spending in the recessed US economy.
Tabcorp is another group of interest to report since the Victorian Government snatched its gaming licence post 2012 away from it. The company’s shares have been weak ever since and there has been talk of some corporate activity.
In the US the focus will be on the Federal Reserve which is expected to leave interest rates on hold and highlight the offsetting upside risks to inflation and downside risks to growth.
The Fed last week added extra liquidity moves to help a still "fragile" financial system which will push its help out into January 2009.
Friday saw the 8th US bank to be seized and closed by regulators this year: it was only a tiddler with just over $US250 million in assets and based in Florida.
But the news of the failure, coming on a Friday after trading ended, will worry investors again: it’s the third Friday in a row that a bank failure has been announced.
The key US regulator, the FDIC, warned four other small US banks Friday to either get new capital, stop lending in some areas, or to stop issuing credit cards. This can be a precursor to later problems as managements struggle to find new capital or income streams.
We will also get US data for pending home sales, personal spending and the Fed’s preferred measure of core inflation will also be released, while in London The Bank of England also meets to consider interest rates, as will the ECB.
Both central banks will most probably leave rates steady, although the Bank of England is under enormous pressure to ‘do something" to ease the economic pain and the slide towards recession.
Like here, the US and other major economies, rising inflation seems to be the least concern in Britain for most people these days, even with high petrol prices still cutting demand at retailers.
US corporates reportin
