There’s an air of heightened uncertainty in markets at the moment. It’s different to the funk the market was in earlier this year, and to the worries about Brexit and what that might mean.
The current uncertainty is about a possible inflection point in monetary policy, which will require a paradigm shift in the way investors and traders have been thinking, and thus investing, in recent years.
Market volatility, as observed by the CBOE VIX index, recovered last week but remains at the highest levels since early July. US 10-year bonds are on the cusp of a break out, German 10’s are back above zero percent, yielding 0.01%, and Japanese 10-year JGB’s are sitting just under zero at -0.035%.
So it’s all about Wednesday and what the Bank of Japan and FOMC monetary policy decisions are – what these two central banks do, say, and how the markets react in the lead up too, and then aftermath, of these meetings.
What happens offshore, and how it impacts stocks and bonds is of vital import to local traders. That’s especially the case after the ASX climbed back into the 2016 uptrend, the Australian dollar ended the week below 75 cents, and Australia’s 10-year government bond rate closed at 2.16%, just a few points from the week’s high.
While everyone is focussed on the BoJ and Fed here’s good news for the stock markrt bulls. Elena Holodny reported on a UBS note on Friday that the only thing that kills a bull market in the US is a recession.
So as the Fed contemplates a move higher in interest rates and the Atlanta Fed’s GDPNow tools say growth this quarter is running at a 3% annualised pace the chances or rcession end any time soon seem remote. But that’s something traders may need to focus on after the Fed.
Australian Calendar, courtesy of NAB Economics (with our emphasis added)
The RBA grabs center stage in a very quiet data week, with RBA Board Minutes Tuesday and the first Parliamentary testimony by new Governor Philip Lowe on Thursday.
The second-tier data flow include ABS House Prices and weekly Consumer Confidence Tuesday, Skilled Vacancies Wednesday, with the week rounded out by another RBA event – this one a speech by Alex Health at a CEDA Conference on “Future Skills” which is unlikely to be market moving.
International Calender (also courtesy NAB Market Economics)
Global : Two words – Central Banks. The US FOMC announces their rate decision Wednesday (no change expected but two dissenters likely) along with the Fed Chair’s press conference and the FOMC’s latest forecasts of growth and inflation. Before the Fed, the BoJ meets where anything is possible following the results of a review of the BoJ’s policy instruments, followed by the RBNZ Thursday.
US: The September 20-21 FOMC takes center stage. No rate change is expected though there could be two dissenters (likely George and Mester), and the rest of the focus will be on “dot plot” forecasts of the Fed Funds rate and the Chair’s press conference. The Fed’s Harker, Mester, and Lockhart are on a panel at a Philly Fed conference on Friday.
On the data front, there is the NAHB Housing index Monday, Housing starts and Building Permits on Tuesday, then Jobless Claims, the Chicago Fed National Activity Index, Existing Home Sales, Leading Index, and the Kansas City Fed Manufacturing Index all out Thursday.
China: Property Prices on Monday the main data interest. Also for release are the Conference Board Leading index on Wednesday and the MNI Business Indicator on Friday.
Japan: All eyes on the BoJ Wednesday with further easing a real possibility. Otherwise a very quiet week with Trade on Wednesday and the Nikkei Manufacturing PMI and All Industry Activity index on Friday.
Euro: The main data interest will be Friday’s September preliminary PMIs.
UK: A quiet week with Rightmove House Prices on Monday, the monthly public finance report on Wednesday, and the CBI trends survey on Thursday.
Canada: Quiet for most of the week ahead of CPI and Retail Sales reports on Friday. BoC’s Poloz speaks Tuesday.
NZ: Thursday’s RBNZ OCR announcement is of prime interest, with Fonterra announcing its 2015-16 results that morning. There’s a GDT dairy auction early AM Wednesday. Data-wise, there’s the Westpac McDermott Miller consumer confidence and PSI Services on Monday, Net Migration and Credit Card spending on Wednesday.
And here is the NAB’s excellent calendar of all the key events and data for the week ahead.
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