As if stocks weren’t already having a bad enough run recently another solid print for US non-farm payrolls, which printed +215,000 in July, has given the Fed ‘cover’ to move interest rates in September. That eventuality appears to worry stock investors.
But it’s the data released in China over the weekend that suggests there is every chance stock traders will take that negative sentiment and run with it when trade opens again on Monday.
Recently there has been a global focus on the slowdown in the Chinese economy and Saturday’s release of trade data for July simply reinforced this. Exports dropped 8.3% year on year against the expectation of just a 1% fall. That’s a big dip from the +2.8% year on year print in June. Imports were down 8.1% against the market 8.0% expectation.
Such an outcome is a risk to the ASX already under pressure after the banks were sold off heavily in the wake of last weeks ANZ capital raising. There is big support just below the market as you can see in the chart below.
With so much happening in the Australian banking sector, the trading update from NAB on Monday and the full-year results from the Commonwealth Bank on Wednesday could contain some of the biggest news of the week. After ANZ’s $3 billion raising last week there is some talk that CBA could be next to go to the market for more capital.
Elsewhere this week in the wake of the RBA’s changed rhetoric about the economy’s potential growth rate and the implications that has for interest rates and the Australian dollar will continue to be a hot topic of debate.
Westpac’s chief economist Bill Evans, writing in his Australian and New Zealand weekly on Friday, said that the new forecasts mean no move in interest rates for some time.
“Readers will be aware that Westpac expects that we are at the bottom of the cash rate cycle with the next move up not expected until well into 2017. The Bank’s forecasts are certainly in line with those views given its expectations of a 3.75% growth year in 2017. The forecasts for 2016, at 3%, with a stabilising unemployment rate, at around 6%, would be consistent with steady rates in 2015 and 2016,” he said.
Already the Aussie is outperforming on forex markets against the US dollar where it is back up above 74 cents.
Turning to the data and we are in the second half of the month so the flow slows but not the importance of the releases this week.
We get two key RBA speeches this week. One from Deputy Governor Philip Lowe on Wednesday night on “National Wealth, Land Values and Monetary Policy” in Perth. On Friday, RBA Assistant Governor Christopher Kent will be talking in Brisbane on “Recent Labour Market Developments”.
Both may give a crucial update on what the RBA is thinking and could add important detail to last week’s Statement on Monetary Policy.
Also out this week is the data release I consider to be the single most important release each month, the NAB’s Business Survey for July on Tuesday. Then on Wednesday Westpac releases its Consumer Sentiment survey for August. NAB also releases its Commercial Property/ ASX 300 Business Surveys Thursday and the ABS will put out wages data on Wednesday.
Parliament is back this week and it seems like there are 5 Liberal MPs in the frame to be the next Speaker in the wake of Bronwyn Bishop’s resignation, with “father of the house” Philip Ruddock looking the leading candidate at the moment.
It could be an interesting week for the Prime Minister as well. The six months he asked his colleagues earlier this year when there were moves to oust him is now up and it seems he’s trailing Labor Leader Bill Shorten in the polls according to Fairfax on Sunday. The LNP Coalition is also behind by six points, on a two-party preferred basis.
Looking offshore, and traders will have plenty to keep them interested.
Monday sees the release of the BoJ monthly economic survey and consumer confidence are out, along with the Sentix investor confidence index in Germany.
Tuesday morning sees the release of electronic card retail sales in New Zealand, wholesale prices and the ZEW business survey in Germany, ZEW Euro wide, Italian CPI and then the NFIB business optimism index in the US where we’ll also get non-farm productivity and inventory data.
Wednesday is industrial production and capacity utilisation in Japan, retail sales, industrial production and urban investment in China. This data will be a huge number for Asian and global markets. French current account, Italian trade and UK employment and unemployment are out. EU production data is out and then we get mortgage applications, crude oil stockpiles, and JOLTS job openings data is out in the US.
Thursday gets big in the US with the release of retail sales in the US. But before that we get Business PMI in New Zealand along with the food price index. Japanese machinery orders are out as is German, French and Spanish CPI.
Friday ends the week with some important data in Europe with the release of French, German, Italian and EU GDP data. PPI in the US will be interesting. Crude has crashed to new lows and that could filter down through producer prices as the deflationary pulse spreads throughout the economy.
Here’s Westpac’s excellent calendar of the week ahead.