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AUSTRALIAN DIARY: Everything you need to know about the week ahead for markets

Photo: Paul Gilham/Getty Images.

After a massive week of data including strong Australian GDP, weak global PMIs, and US non-farm payrolls on Friday it’s set to be another big week ahead with the focus shifting to Chinese trade and inflation as well as the next ECB meeting in Europe.

Also on the agenda is the wash up from Friday’s much stronger than expected non-farm payroll print of 242,000 jobs in February. That’s a huge number but strangely it neither hurt the stock market rally, or gave succour to the US dollar which was hammered on Friday night.

That left global stocks with another strong week as the risk rally continued. Crude oil surged again and is back near $36 a barrel, copper is strong at $2.26 a pound and the Australian dollar has broken the top of its 5-month trading range with a close on Saturday morning of 0.7440 — the highest level since July 2015.

It’s another big week of data and traders and investors will need to do some crucial thinking about China, the ECB, the Fed and what it all means for markets.

Top Stories

  • China officially lowered its GDP target over the weekend: Chinese trade and inflation data is out this week and traders will be hanging off these releases. But the question is what will markets have to say about the official downgrading — what China’s Xinhua news agency called a softening — of GDP targets for the year ahead.

    At the 4th session of the 12th National Peoples Congress (NPC) over the weekend, China downgraded the growth outlook to a range of 6.5-7.0% from last year’s target of around 7%. Xinhua said: “By setting the GDP growth target in 2016 at a range from 6.5 to 7 percent instead of a specific figure, the Chinese government has applied more flexibility in economic management, making room for structural reform to realise long-term growth.”

    As if to underline the point, the FT quotes Premier Li Keqiang saying “pursuing development is like sailing against the current: you either forge ahead or drift downstream.” He also said the government must “ensure that China’s economy, like a gigantic ship, breaks the waves and goes the distance.”

    Markets and traders will be watching trade and inflation data closely this week to see just how rough the seas ahead might become.

  • US non-farms, the Fed, and the risk rally continues

    The US jobs market is still on fire, confounding all the doomsayers who think there could be a recession anytime soon (don’t tell Jim Rogers though he reckons its 100% certain) with Friday night’s 242,000 print for February non-farm payrolls slamming expectations of a rise of 195,000.

    That didn’t hurt stocks in the US with the bellwether S&P 500 finishing the week up 2.6% at 2000. But here is the questions traders will be asking themselves in the next few weeks if the risk rally continues and US data keeps surprising. At what point does the Fed recalibrate, its seemingly already recalibrated expectations for rate rises in the US.

    That means Thursday week’s FOMC decision on March 17 and the associated release of the latest “dot plot” of Fed expectations for rate rises is more important than ever. In the meantime the tension between the rally and fed expectations looks likely to persist.

Economic Calendar

Australian Calender – (courtesy NAB Economics)

With early-month key monthly ABS partials, the Reserve Bank Board meeting and Q4 GDP out of the way, it’s a less hectic schedule for next week.

Tuesday’s NAB business survey and Westpac consumer sentiment are the more significant data releases in a quiet week. But, ANZ job ads for February, ahead of Thursday week’s labour force report are out Monday.

Also on the calendar is what could be a scene setting speech from RBA Deputy Governor Philip Lowe who is peaking on “Resilience & Ongoing Challenges” to the Urban Development Institute of Australia’s Annual Congress in Adelaide on Tuesday morning.

  • NAB Business Survey – February: No clues or hints on what the February survey might or might not include! Recall that the business survey softened slightly in January, although the deterioration was to a large extent driven by sharp decline in mining and wholesale. Conditions were generally mixed elsewhere and was largely concentrated in Western and South Australia where the flow-on effects from the mining slowed were evident.

    Business conditions eased back to +5 points in January, with business confidence continuing to hold up in the face of turmoil in financial markets, despite the effects it appears to be having on sentiment globally. Confidence was steady at +2, likely bolstered by the point business conditions within Australia.

International Calender (also courtesy NAB Market Economics, and CommSec)

NZ: RBNZ cash rate announcement Thursday; data includes manufacturing activity Tuesday, card spending Wednesday, then food prices, NZ manufacturing PMI both Friday.

China: February trade on Tuesday, CPI/PPI Thursday, then February industrial production/ retail sales/ fixed assets investment data Saturday; monthly new lending data also due from later in the week.

Trade is super important – traders will be looking at exports and imports as a proxy for both Chinese and global growth. But it many ways the release Thursday of price data could be the highlight. Last month saw a subtle shift in producer prices which nudged 0.1% higher to – 5.3%. “Consumer prices are rising at a modest 1.8 per cent annual rate. Further tame inflation readings would leave the door open to more stimulatory measures,” Sebastian and James said (our emphasis).

US: NFIB small business optimism Tuesday, wholesale inventories Wednesday, jobless claims Thursday. Fed’s Stan Fischer speaks at NABE economists’ conference in Washington Monday; Fed’s Brainard also speaking Monday, at a banking conference. The presidential primaries roll on and the EIA releases its latest energy outlook Tuesday.

Japan: BOJ’s Kuroda speaks Monday. Data includes leading index on Monday, second estimate of Q4 GDP, Current account, Consumer confidence, and Economy watchers survey, all out on Thursday, Machine tool orders Wednesday.

Euro: ECB meeting Thursday the highlight with another cut to the deposit rate expected, by 10 bps to -0.40%. Sentix investor confidence Monday, second estimate of Q4 GDP Tuesday.

UK: Industrial production Wednesday, RICS house price balance Thursday, trade on Friday.

Canada: BOC meeting Wednesday and BOC Governor Poloz speaks Friday. Housing starts/ permits Tuesday, capacity utilization, new house prices Wednesday, employment Friday.

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