Will Tony Abbott still be Prime Minister?
That’s the big question in Australia this week. But before that question can be answered the “spill motion” to vacate the leadership positions needs to get up at 9am Monday morning first.
Cabinet solidarity and the Prime Minister’s “captains call” to pull forward the spill motion from Tuesday to first thing Monday would appear to make it more difficult for the forces rallying against him. But former Assistant Treasurer and Howard era powerbroker Arthur Sinodinis’ public decision to support the spill motion suggests that the Prime Minster’s actions could have been a tactical mistake.
We’ll know today.
Either way, the leadership turmoil is unlikely to materially impact Australian markets, given the RBA’s Statement on Monetary Policy and US non-farm payrolls were both released Friday and Australia has a full book of economic releases this week including a speech from the RBA governor Monday, and his appearance before the House of Representatives Economics Committee.
Also released this week are the January NAB business Index on Tuesday, February’s Westpac Consumer Sentiment Index on Wednesday and then the January jobs data for Australia on Thursday. The market is only expecting a rise of 5,000 jobs at the moment.
Sentiment has never been more important in restraining economic activity in an Australian economy which has had relatively good underlying data. Bill Evans, Westpac Chief economist is looking for a bounce in confidence given the Westpac survey “will capture reactions to the RBA’s surprise 25bp rate cut.”
But Evans notes that such a cut would usually “be a positive for sentiment, [but] the impact is less clear cut when easing is in response to a downgraded economic outlook.”
Turning offshore and the reverberations of the big non-farm payrolls for January at +257,000, more than 10% bigger than expected, will be felt throughout markets. Views on the timing of the Fed’s first increase in US rates will be the dominant force in global markets this week after the US dollar moved sharply higher along with US 10 year treasuries, which sold off 16 points on Friday to close the week at 1.96%. That’s the highest close in more than a month.
This is a complete unwind of fears bond traders held that the US economy would be dragged down by economic weakness elsewhere and it is likely to give succour to US dollar bulls, bond bears and perhaps stock bulls as well, given the emerging US economic strength.
The Aussie dollar and perhaps even local bond markets will be pressured from this recalibration.
Looking at the big offshore data releases and key for the global economic debate will be Chinese trade and CPI data. In the UK the Bank of England’s quarterly inflation report is huge as is Governor Carney’s speech in the wake of the release Thursday night. FTSE and Sterling traders will be watching closely.
German and EU GDP are out Friday night to round out another big week.
Here is Westpac’s excellent data calendar of all the key events this week in global markets.