AUSTRALIAN DIARY: Everything you need to know about the week ahead for markets

Pick your superlative. It’s going to be a critical week for markets both here in Australia home and around the world.

In Australia we get an RBA meeting Tuesday, Q3 GDP Wednesday, partials such as company profits, inventories, net exports and government spending in the two days before that. If that’s not enough we get the release of monthly inflation data from TD Securities as well as trade on Thursday and retail sales Friday.

Each and every one of those data points is a source of risk or opportunity for markets.

After CAPEX disappointed last week the door became slightly more ajar for an RBA rate cut. Not this week of course because in a speech last week RBA governor Stevens said, “We’ve got Christmas. We should just chill out, come back and see what the data says.” But the next meeting in February could be live if we get a weak run of data.

That means the TD Securities monthly inflation release on Monday takes on more importance than usual given it is inflation, or its absence, that has pushed the door open at the RBA. What’s particularly important is that that prices remained unchanged last month and the year on year rate is below the RBA’s 2-3% band at 1.8%.

The big question is whether the economy is strong enough for business to pass on the increased costs associated with the fall in the Australian dollar. In this sense, low inflation is a sign that the RBA may need to add further stimulus in 2016.

Company profits and inventories are also out Monday and both are important in helping economists build the picture of what they think Q3 GDP is going to add up to. Also important on that theme are net exports and government spending on Tuesday.

Net exports is looking strong according to the NAB’s market economics team. Currently most of the growth is expected to come from net exports (Aussie dollar channel) they said in their “What to Watch” publication Friday. The NAB thinks this area of growth will add 1.3% to GDP after subtracting 0.6% last quarter.

Wednesday sees another speech from RBA governor Glenn Stevens who is talking at the Australia-Israel chamber of commerce on economic conditions and prospects. That speech starts at 11.12am AEDT.

Less than 20 minutes later we get the release of Q3 GDP which will give us a sense of just how strong the economy was up to the end of September. It’s a little historic, particularly given the renewed sense of confidence that has accompanied the elevation of Malcolm Turnbull to the prime ministership, but starting points are important.

The Reuters poll shows the market is looking for a quarterly increase of 0.7% to follow last quarter’s dismal 0.2% with the annual growth rate expected to print 2.3%.

The NAB said they expect the break up of growth to be made up of “moderate household consumption, a small increase in dwelling investment, and a sharp increase in net exports, while investment is expected to decline sharply on the back of the mining investment unwind.”

There is plenty of room for disappoint there it seems.

Thursday we get trade and then retail sales for November on Friday will deliver an up to date check on the pulse of the economy. The market is looking for growth of 0.4% while the NAB says they retail sales will print fairly weakly with an increase of just 0.2% in the month.

Offshore the week is no less important with the ECB holding its policy meeting and the US releasing non-farm payrolls.

Both events are huge.

Mario Draghi has spent the best part of a month almost guaranteeing a big response from the ECB to Europe’s growth and inflation problems. But he was publicly challenged last week in an important break of protocol by Sabine Lautenschläger, a member of the Executive Board of the ECB, who challenged the need for more QE. Lautenschläger has form on this opposition to QE back in 2014. But her intervention, and the Reuters article last Wednesday night which showed just a week before the meeting the ECB is still not sure what to do, suggest there is some opportunity for market disappointment on December 3rd.

Traders seem to be betting it will be the catalyst for a big fall in the Euro with many now forecasting EURUSD to parity by years end.

US non-farms on Friday will round out the week and are widely viewed as the final word ahead of a likely Fed rate hike December 16. The market is forecasting a rise of 200,000 to follow last month’s huge 271,000 gain in jobs.

That strength in jobs, along with the expectation the ECB will deliver more QE, has been the big driver of markets in the past week. The Euro and Pound have crashed as the US dollar has strengthened. Gold collapsed at week’s end and oil was under pressure both because the US dollar is strong but also because we have a very important OPEC meeting this Friday. Many traders believe it’s a meeting that could finally see the Saudis address the markets over-supply issues. But of course, there are others that suggest that whatever the Saudis do won’t help because Iran is back producing.

But before we get to OPEC and US non-farms on Friday there are plenty of important offshore events.

In China, we get the release of the official and unofficial PMIs on Tuesday. Is manufacturing recovering? What of services? After Friday’s regulatory induced sell-off in Shanghai stocks traders, in Asia at least, will be watching to see where the next shoe drops.

My sense is that in pursuing their policies at the moment the President, Premier and their leadership cohort in China see part of fixing the Chinese economy, its markets, and property is that they have to break some eggs. That continues to be a risk for markets in the short term, and their view of the Chinese growth outlook. Longer term however if the President and his team can see it through the current leadership should set China up for a stronger economy in the long run.

Japan has some important data out as well. The nation’s economy has fallen into a hole and it looks like another supplementary budget is on the way soon. On the data front, industrial production is out Monday. The NAB says this “should be watched for the forward expectations for December, which are a guide to Chinese growth also.”

In Europe besides the ECB meeting Thursday we get German CPI Monday night which will be an important indicator of how the hawks on the council might vote. German unemployment Tuesday is also important and Wednesday sees the release of German retail sales and EU CPI. Of course, we also have a raft of European PMIs across the week but the preliminary data last week suggested things are on the improve for the region.

Turning to the US now and it’s a big week with a speech by Fed chair Yellen and the Beige Book on Thursday the highlights other than Friday’s jobs data. But we also get a raft of other Fed speakers ISM manufacturing Wednesday night, ADP employment early Thursday morning while Challenger job cuts are out Thursday night.

It’s a huge week with many points of pressure for traders and the market.

Here’s the NAB’s excellent calendar of all the key data and events:

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.