It’s a light data calendar this week, so sharp moves in Australian markets are likely to come from changes to the risk outlook for the global economy.
On the political front, prime minister Malcolm Turnbull is hosting a dinner for members of his cabinet on Sunday tonight to discuss strategy, amid rumours of a leadership challenge.
There are some reports that Turnbull may prepared to abandon his approach to company tax cuts and drop his plans to lower the corporate tax rate for the largest firms, which would include the big banks. Labor’s allegation that Turnbull is “giving billions to the big banks” has been registering with the public and continues to cause political problems for the Coalition, especially given the optics of financial industry malfeasance being exposed by the royal commission. So it could be a decisive week for the policy outlook.
US stocks edged higher on Friday night to close just shy of their record-highs reached in late-January.
It capped off a nervous week for global markets stemming from the collapse of the Turkish lira. After steadying mid-week, the lira lost ground on Friday to close back above 6 per US dollar.
Pressure remains on emerging markets more broadly, as Chinese stocks tanked to end the week while the MSCI Emerging Markets Index is now in a bear market, having lost more than 20% since January.
Although global risks remain evident, ASX futures markets closed 28 points higher ahead of Monday’s open.
And the AUD rose back above US73 cents on Friday night — a gain of 0.8% — after RBA Governor Lowe reitereated that the next move on interest rates was still likely to be up.
For a look back over the Turkish crisis and the impact of the rising US dollar, tune in to the latest episode of Business Insider’s Devils and Details podcast, which you can find on iTunes, or listen in below.
To the week ahead:
Minutes from the RBA’s August board meeting on Tuesday (11:30am AEST), “are unlikely to provide much of a catalyst for the AUD in either direction, given that the bank is maintaining a neutral stance” on rates, ANZ’s currency strategists said.
There’s also a speech by RBA deputy governor Guy Debelle on Wednesday called “Low Inflation”.
In other RBA news, governor Philip Lowe will speak on Tuesday at the launch of ASIC’s Financial Capability Strategy. Then RBA assistant governor (business services) Lindsay Boulton gives a speech on Thursday called “The Reserve Bank’s Government Banking Business”.
And the first of the data inputs for next month’s Q2 GDP results will come through, with construction data for the June quarter due from the ABS on Wednesday.
The minutes from the Federal Reserve’s August meeting on Tuesday night “are unlikely to provide anything new for markets”, ANZ said.
Instead, this year’s symposium of central bankers in Jackson Hole — which kicks off on Friday night — “will be more interesting to watch, in our view. This year’s topic is ‘Changing Market Structure and Implications for Monetary Policy'”.
Markets will also get an update on the global economic outlook with another wave of PMI data due out on Thursday for Japan, the US and the Eurozone.
Here’s this week’s full calendar, via ANZ (key events for currency markets in dark blue):
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