US stocks staged a big reversal and rally on Friday to finish higher for the last day of a wild week’s trade. They were still down 5.2% for the week and Monday’s trading session in Asia and the direction of equities markets through the European and Wall Street sessions will set the tone ahead of all-important US inflation data out on Wednesday night (Australian time.)
Another upside surprise in that US inflation data will reinforce the view that price pressures are returning to the US economy. Stronger than expected wage price data was the initial catalyst for the mini-riot in bonds that started the sell-off in equities that reverberated around the world last week.
For Australia, Thursday’s jobs report for January will be the key data of the week, while reporting season continues with results due from more than 50 major companies including Cochlear, South 32, IAG, ASX, Origin, and Telstra.
It’s a busy calendar abroad, too, again all hinging around the US inflation data.
The rally in US stocks on Friday came as the S&P500 rebounded off its 200-day moving average, and US Congress passed a bill to extend government funding through March 23.
UK and European markets both finished more than 1% lower in the wake of the Friday selloff in China, which saw the Shanghai SE50 fall by as much as 6.5% before closing 4.6% down on the day.
The Aussie dollar found some buyers with a bit more risk appetite in global markets on Friday night, closing the week at 0.7815 US cents.
Bond yields remain elevated, with US 10-year bond yields closing at 2.857% — just shy of the recent four-year high of 2.88%.
Thursday’s employment report (ABS, 11:30am AEDT) is expected to show the Australia’s economy continued to add jobs in January, after total employment soared by 403,100 in 2017 — the highest total for a calendar year on record.
The median forecast is for another 15,000 jobs added in December.
While total employment is climbing, wage growth remains low and next week’s jobs numbers will precede quarterly wages data on February 21 — which is shaping up as the most important data release on the near-term economic calendar. More on that here.
Also next week, the NAB will release its widely-read business survey for January on Tuesday (11:30am AEDT), with recent data showing Australian business conditions remain near all-time highs.
And on Friday at 9:30am AEDT, RBA Governor Philip Lowe will make his half-yearly testimony to the House Economics Committee in federal parliament, followed by a Q&A session.
Here’s this week’s full local calendar (via ANZ):
US CPI inflation data on Wednesday night will be closely watched, along with retail sales figures.
In a busier week of data releases, the US also has January numbers for initial jobless claims and industrial production on Thursday night (AEDT).
There’s also January data for new housing starts on Friday — which are often seen as a good leading indicator for growth in the US economy.
Outside of the US, the UK also has January inflation data on Monday night and retail sales figures on Friday.
China has a national holiday on Thursday and Friday for the annual Lunar New Year celebration.
Here’s the full international calendar (also via ANZ):