Stocks in the US ended the week on a bit of a downer, with the Dow 0.71% lower, while the S&P 500 dipped 0.6% to 2164. That’s off the week’s highs, but still higher at week’s end for the second week in a row.
Stocks were able to lift after the Fed and Bank of Japan, amongst other central banks, signalled the end to monetary accommodation is not as nigh as many feared – even just a week ago. That set off a rally in risk assets like the Aussie dollar and copper. Even gold caught an updraft. Bonds rallied as well, reversing some of their recent weakness.
Looking at the week ahead, futures traders are betting the ASX will give back a little of last week’s strong gains in a pretty light week of data that still has plenty of important speeches across the globe. That includes 12 Fed speakers, as well as ECB president Mario Draghi and BoJ governor Kuroda, while locally Malcolm Edey, RBA assistant governor, speaks on Wednesday.
Markets focus will now turn to the US election with the Presidential debates. It was a big day in US politics Friday with Ted Cruz performing a back flip with his endorsement of Donald Trump.
It caused Trump’s campaign manager to say “hell froze over today and it feels like heaven“.
It’s a political move by Cruz, but one that seems likely to have increased Trump’s chances of winning the November 8 presidential election. That’s certainly the view of Professor Allan Lichtman the man who has accurately predicted the outcome of every presidential election since 1984.
It all means Monday’s (US Time) first US presidential debate between Hillary Clinton and Donald Trump is an important political and market scene setter. Some investors, like Mark Cuban, fear a Trump presidency will collapse the stock market, while strategist Ian Bremmer says Trump “is a threat to US political institutions and values”.
Most traders and pundits see Clinton as more establishment. So, no matter what side traders favour they’ll be wondering about what others think is going to happen. It’s Keyne’s “beauty parade” analogy all over again, so how the debate goes could inform market sentiment for the remainder of the campaign.
Will OPEC deliver a production cut this week? Like the US Federal Reserve, OPEC has become a serial offender in promising action but delivering nothing. This week’s meeting in Algiers is reading from the usual script, even before the meeting has begun. In the past month we’ve had hype for a deal from the Saudis, Russians, Iranians, Iraqis and others, but in the past few days that momentum for a deal seems to have dissipated once more.
Capital Economics says “overall, we are not expecting an agreement to limit output this week. Admittedly, we do expect more comments from Russia and the various OPEC ministers, which could make prices even more volatile than usual in the first half of this week. But our end-2016 forecast for the prices of both Brent and WTI is still $45 per barrel, slightly below where they are today”.
Australian Calendar – (courtesy NAB Economics)
A quiet week with no significant data flow. Plenty of second-tier data including weekly Consumer Confidence Tuesday, Financial Accounts Thursday, and Credit Statistics Friday.
Australian household wealth underpinned by housing
In his podcast with Paul Colgan and David Scutt this week Federal treasurer Scott Morrison noted that household consumption has been underpinning Australia’s 25-year stretch of growth without a recession. Housing, and its rise in value over the past couple of decades has been a large part of that, via the wealth effect.
So it’s interesting that even though this week’s Financial Accounts don’t usually get much attention the NAB says the release is the “the pick of the bunch” as the final inputs into Household Balance Sheet statistics, compiled and published by the RBA.
“In the March quarter, net household wealth stood at 672% of household sector income, with the relative level of wealth just getting back to pre-GFC levels. The major asset underpinning household balance sheets is of course housing assets, but financial assets have also risen strongly with very strong growth in household deposits”, the NAB says.
International Calender (also courtesy NAB Market Economics)
Global : Fed speakers dominate, with Fed Chair Janet Yellen, on Wednesday and Thursday. OPEC meets on the sidelines of an energy conference Monday-thru-Wednesday. Key China PMIs on Friday and next Saturday, and the latest US PCE is also Friday. Markets also likely to pay more attention to the US elections with the first debate Monday.
US: A quiet data week ahead with the most significant releases being Durable Goods on Wednesday and PCE Deflators, Friday. The third read of Q2 GDP on Thursday may also garner attention along with the Conference Board’s measure of Consumer Confidence Tuesday given the subdued Michigan measure. US Presidential elections are also likely to start being noticed by markets with the first debate Monday (watch the Mexican Peso). Plenty of Fed speakers too with Yellen the key one, as noted above.
China: PMIs loom large with the chance of a weaker-than-expected print given recent typhoon activity and factory restrictions ahead of the G20 meeting earlier this month. The Caixin PMI is Friday and Official PMIs are out next Saturday. Other data includes Industrial Profits, Tuesday, and Consumer Sentiment, Wednesday.
Japan: This week sees the deluge of monthly data with Retail Trade on Thursday, and the Unemployment Rate and CPI, Friday. The Japanese labour market has been tightening and remains an important factor in boosting wages growth over time. BoJ Governor Kuroda speaks Monday and Thursday.
Euro: Draghi speaks Monday while Unemployment and CPI are on Friday. In Germany IFO is Monday, Retail Sales is Tuesday and Unemployment and CPI, Thursday.
UK: A quiet week with no significant data apart perhaps from a final read on Q2 GDP and Gfk Consumer Confidence, Friday.
Canada: Monthly GDP on Friday, while BoC Governor Poloz speaks Monday.
NZ: Merchandise Trade Monday and ANZ Business Survey on Friday the most significant. Other data includes New Residential Lending, Monday, and Building Consents and Credit Aggregates, Friday.
Now, here’s the NAB’s excellent calendar of the week’s key events and data.