Markets across the globe finished the week at or near all-time highs on Friday and the ASX 200 has gone along for the ride. It’s likely that the local stock market will have its 7th or 8th attempt to break 6,000 in 2015 this week.
Given the rally in iron ore since its lows earlier this month, and the change in sentiment this has brought to local traders – particularly towards miners such as Fortescue Metals and BC Iron – the chances are that if the ASX is ever going to be ready to break 6,000 now is the time.
That’s doubly so because if – and it’s still a big if – iron ore is heading back to an average price of “US$55/t this quarter” as Joel Crane, Commodity Strategist at Morgan Stanley in Melbourne told Business Insider on Friday then Australia’s terms of trade – national income – might have stopped falling. That’s good for growth and also for Treasurer Joe Hockey’s Budget, which will be released on May 12.
So the growth outlook for the economy and for Australian companies may be improving. Which, given the global liquidity backdrop and record highs on global stock markets is the type of fuel the ASX needs if it is to finally break 6,000.
We’ll know this week.
While stocks will be the headline act this week for local traders the speech by RBA Governor Glenn Stevens at 8.40am in Sydney on Tuesday morning will also be a key focus. The NAB’s economics team thinks the Governor might steer clear of market-moving themes given the proximity of the Board meeting next week and, that he gave a speech on the economy last week “pointing to the Bank’s continuing easing bias with the meeting outcome a balanced consideration.”
The data calendar is otherwise light in Australia for the week save for private sector credit on Thursday and the AiGroup’s PMI and producer prices are released on Friday.
Globally, is there a more important data point in markets than US GDP at the moment? Markets will be hanging on this release Wednesday as a way to gauge the outlook for Fed tightening for 2015. The market is expecting a sharp deceleration to 1% in Q1 2015 from the 2.2% recorded in Q4 2014.
Westpac Chief Economist Bill Evans said in his Australia and NZ Weekly on Friday: “Temporary and ongoing factors are at play: winter disruption; ports disruption; a rising US dollar competitiveness impact; lower price impact on oil sector investment and output; and global growth disappointment.” That’s the point Fed Vice Chair Stanley Fischer made last week.
Which makes the outcome of the FOMC meeting, five and a half hours after GDP is released, on 4am Thursday morning Sydney/Melbourne time, all the more important for the direction of stocks globally.
Elsewhere around the world retail sales in Japan are out Tuesday along with UK GDP for Q1. EU consumer and business confidence, along with German CPI are out Wednesday. Both the RBNZ and BoJ have monetary policy announcements on Thursday along with German retail sales and unemployment. EU CPI is also out Thursday along with US jobless claims and personal consumption and income data.
Friday is May 1st so it’s a holiday in many markets.
And of course we’ll all be watching China again. Particularly after Li Yangzhe, head of the economic operation office at the National Development and Reform Commission (NDRC), said on Friday that “there will be a greater effort to adjust economic policies. There will be a bigger effort to stabilise growth.”
Here’s Westpac’s excellent wrap of all the key data and events for the next week.
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