Australian markets will open the week amid more political uncertainty in Canberra, as the crucial by-election in Wentworth remains a little too close to call.
With the Coalition clinging to a one-seat majority in the lower house, independent Kerryn Phelps is holding a slim lead over Liberal Dave Sharma, with the result now set to be decided by postal votes.
A miscount of preference allocations in one booth initially had Sharma within 900 votes of winning, but a recount saw Phelps’ lead more than double to more than 1800 votes in a swing of 19% against the Liberals.
On the data front it’s a relatively quiet week ahead, both locally and abroad.
US stocks edged lower in a cautious session to end another volatile week, as tech stocks again came under pressure.
ASX futures closed slightly lower while the AUD held steady above US71 cents on Friday night. Benchmark US 10-year bond yields climbed back to 3.2%.
Italian bond yields fell sharply, after the EU’s chief economic commissioner reached out to maintain dialogue with Italian authorities over the country’s draft budget plans.
However, Italy’s response to the EU’s initial rebuke of its budget plan is due Monday, and markets are braced for more volatility in the week ahead.
With no key data on the schedule, markets will take note of a round of speeches by RBA committee members to start the week (see calendar below).
However, “there is likely to be no change in their message — the RBA is comfortably on hold”, ANZ’s currency strategists said.
As a result, catalysts for the AUD are likely to be driven by global developments.
Markets will get an update on global economic activity on Wednesday, when preliminary October manufacturing/services PMIs are released for Japan, the US and Europe.
Also on Wednesday, Canada’s central bank will meet and is expected to raise rates from 1.5% to 1.75% (80% priced in on futures markets).
“Canada’s economy is operating close to capacity and downside risk has been reduced following the new US-Mexico-Canada trade agreement,” Commonwealth Bank said.
That’s followed by the European Central Bank’s policy meeting on Thursday which is “unlikely to offer any surprises”, ANZ said.
The ECB is “likely to signal it expects to keep the key interest rates at their present levels ‘at least through the summer of 2019’, and stop its asset purchases at the end of December 2018,” CBA said.
Key data in the US will be led by the first reading for Q3 GDP on Friday, which is forecast to show strong annual growth of 3%.
Here’s the full calendar, via ANZ:
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