Here Are The Top Five Economic Data Points All Retail Share Traders Should Understand

China Getty/Lintao Zhang

Markets react to a large number of stimuli – among the most important is the economic data that is released each month for the economy both here in Australia and overseas.

Sometimes this data can go unnoticed but at other times it can have a big impact on trade and move the market significantly.

Here are the top 5 data releases that retail investors in Australia should pay attention to in the current market environment.

1. The HSBC Chinese Manufacturing PMI (and the related NBS PMI)

This is released in preliminary form in the last week of the month and then in final form the first week of the next month.

PMI is the acronym for Purchasing Managers Index and gives economists and the market a read on the state of the Chinese manufacturing economy and because of China’s linkage with Australia the demand for iron ore, coal and the general health of the regional – and thus, Australian – economy.

Related to this are the other Manufacturing PMIs that are usually released on the same day or following day to the Chinese manufacturing PMIs, and then the Service Sector PMIs in the days following.

2. The NAB Business Survey

This is released each month with a bigger survey each quarter. It’s not the headline release for confidence or conditions that is important for retail investors, although they do move the market, but it is the sub-indices like employment and the survey by sector which can give investors a lead on how the economy is really doing and where the strong and weak parts are.

It will take a little work for the average retail investor to study this one but in the end the effort will be worth it.

3. The Reserve Bank of Australia’s interest rate decision

This is an obvious one. On the first Tuesday of each month except January the Reserve Bank of Australia Board sits down to decide the fate of interest rates.

More often than not they like to validate market expectations but the past few years have seen a few surprises which have moved markets.

The importance of the RBA decision is that it impacts the cost of borrowing in the economy and economic activity – the level of interest rates and activity in the economy directly impacts on the banks and other sectors of the economy and thus provides a guide.

To movements in stocks, forex and sub sectors within the market which are interest rate sensitive.

4. US Non-Farm Payrolls

Arguably this is the most important data released on the planet each month and it’s usually released on the first Friday of each month.

Because it is released either at 10.30pm in the Australian winter or 12.30am in summer (Sydney time), when the Australian market is closed so there isn’t much Australian traders can do other than ensure their stops losses are in and covering them for any big moves.

Non Farm Payrolls is released by the US Bureau of Labour Statistics and, true to label, it measures the growth in employment in the non-farm sector of the US economy including jobs in government.

Even though employment is seen as a lagging indicator, because these US jobs numbers are released so soon after the end of the previous month they are very influential in giving the market and the US Federal Reserve a gauge on the health of the economy.

Non farms move stocks, forex, interest rates and commodities. It is of supreme importance.The US Federal Reserve’s decision on monetary policy.

5. The US Federal Reserve’s decision on monetary policy

This is the most important by a very long way in the current environment. It is usually released at 6.30am in summer and 4.30 am in winter, Sydney time, and the decision of the Fed sets the tone for risk assets like shares and the Aussie dollar around the world.

Currently markets are primed to respond to any Fed move on interest rates and it’s quantitative easing program. Talk of reducing this – the “Taper” – is the number one market mover at the moment and will be for some time.

There are many other data out each month – some impact markets at the margin and others have specific importance but the five above are easily the most important data points or economic releases all traders have to keep an eye on.

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