A fall of 1.5% doesn’t sound like much, but the fact that the Dow Jones and Nasdaq lost that much on Friday – and that almost every major global stock market, with the usual exception of Shanghai, finished last week in the red – suggests this week is going to be a very interesting one for global markets.
The weak close on Friday looks troubling for everyone. Shanghai is likely to open under pressure as well after Chinese regulators warned investors to be “calm and rational”. But no-one listened Friday so perhaps it will be business as usual. That’s particularly the case after the 100 point cut by the PBOC to the banks Reserve Ratio Requirement which intended to release cash on bank balance sheets into the Chinese economy.
In Europe the further we get into April, the closer we get to a complete breakdown in negotiations between Greece and the EU. At least that is what markets once again fear. Default is back on traders’ minds.
While local stocks will open with a poor lead from offshore markets and traders will naturally take direction from there, the ASX 200’s deteriorating technical situation leaves the market looking biased back toward 5,735/5750 after the big break.
On the data front it’s a fairly quiet week, both here and around the globe. The key local highlight is the March quarter CPI release on Wednesday. Headline CPI is expected to print just 0.1%, while the core CPI reading is likely to print 0.6% – taking year-on-year rates to 1.3% and 2.2% respectively.
If realised, that outcome is likely to reinforce expectations the RBA will cut rates on May 5.
Before that however, on Tuesday, 12.01am EST to be exact, RBA Governor Stevens will be speaking at an American Australian Association luncheon hosted by Goldman Sachs in New York. Interest rate and forex traders will be hanging on his every word. Likewise, they’ll be hanging on every word of the Minutes to the last RBA Board meeting, released at 11.30am Tuesday.
Offshore the Producer Prices land in Germany on Monday with the ZEW survey out Tuesday, Japanese export data is out Wednesday morning and a Bank of England MPC cut Wednesday night. US existing home sales are out Thursday morning and Flash HSMC manufacturing PMI for China, and associated flash PMIs around the globe, are out Thursday, along with UK retail sales.
In the US, jobless claims and new home sales are out Thursday night and there is a vitally important Eurogroup meeting Friday before Durable goods orders in the US round out the week.
However, markets, and market price action are likely to dominate this week. Fear, or at least a little fear, looks likely to be the key driver of markets this week – along with a huge number of US corporate earning results.
And finally, here is Westpac’s excellent summary of all the key data and events for the week ahead.