There’s no toss of a coin needed to see which will be the most important this week from the Group of 20 leaders meeting, or the two day Federal Reserve meeting in Washington a couple of days earlier.
It will be the Fed, because the G-20 leaders will say a lot, but no bonding decision will emerge from the meeting in Pittsburgh on Thursday and Friday.
And that will simply reflect the improvement around the world in markets and in sentiment.
Imagine the meeting was being held against a backdrop of the events a year ago as markets quivered after Lehman Brothers failed and a host of other financial groups collapsed.
The G20 leaders’ meeting is likely to start to focus more on the aftermath from the global financial crisis.
President Obama talked up the G-20 meeting in his usual weekend radio speech.
He said he would use the G20 platform to speak to other world leaders about the need to improve regulations to provide more safety for the global financial system.
A key message is likely to be the same as that from the G20 Finance Ministers meeting two weeks ago in London that policy makers are committed to maintaining policy stimulus for now.
That’s despite rising levels of angst in some countries that things are rapidly recovering and that the stimulus packages should be wound back.
Markets are still pricing in a V-shaped recovery in the US and other parts of the world, when it just won’t happen.
There will be a lot of talk about the still touchy issue of bankers’ pay: the Fed revealed a multi-strand approach on Friday that seems interesting and designed to cope with groups of different size and complexity.
However, the Federal Reserve has more important considerations this week, its six weekly rate discussion.
The Fed’s Open Market Committee will meet on Tuesday and Wednesday.
Investors are looking for increased optimism on the economic outlook from the central bank in the usual post-meeting statement.
The statement will be issued early Thursday, Australian time.
But is expected to yet again leave interest rates on hold at 0% to 0.25% and continue to signal that they will remain low for an extended period given the still weak real economy.
That’s even after the flow of relatively good news last week in the US, the remarks of Fed chairman, Ben Bernanke that the recession is most likely over, and more good data expected this week.
A rate rise from the Fed would send a jolt through markets; but that would actually be relatively good news because it would mean the Fed is starting to be worried about inflation, not the weak economy.
But inflation remains very weak at both the producer and the consumer level, as we saw last week.
Even when it rises in coming months, that won’t be a problem, just the statistical effect of the very high months of 2008 rolling off the annual comparison and we start getting to negative months.
Unemployment remains a big problem in the US and continues to maintain enormous downward pressure on wages and other costs.
While that continues, inflation won’t be a problem, no matter how much money the US government borrows.
(And by the way, corporate bond issues, both rated and junk are steaming along at high rates in the US)
The coming week will see data for US home sales and consumer sentiment are likely to show a further improvement and the trend in durable goods (washing machines fridges, boxes, etc) orders are likely to remain up.
US surveys of manufacturers continue to show an improvement in conditions.
Last week saw home builders’ conditions rose further, housing starts and permits continue to recovery, industrial production increased for the second month and retail sales rose by more than expected in August.
According to the AMP’s chief economist, Dr Shane Oliver it’s looking likely that US GDP will be up by 1% or more in the current quarter.
At the same time, inflation remains a non-issue in the US with core inflation falling to just 1.4% over the year to August.
Eurozone construction activity fell in July but exports rose solidly and inflation remained non-existent. Unemployment continued to rise in the UK, reaching 7.9% in July.
In Australia, data for motor vehicle sales and new home sales will be released.
The RBA Financial Stability Review is likely to highlight the improvement in financial markets over the last six months and the relative resilience and stability in the Australian financial system.
Linked companies Washington H Soul Pattinson and Brickworks both report their 2009 full year figures this week.
Souls Patts warned late last week earnings will fall short of guidance. Brickworks will give us a good guide as to whether the first home buyers building rush is impacting its brick-making business.
In the US quarterly profits from ConAgra Foods Inc, Bed Bath & Beyond Inc, General Mills Inc, Rite Aid Corp and Lennar and KB Homes.
Carnival Cruises will also report this week. In Europe the clothing retailer H&M reports half year earnings.
Blackberry maker, Research In Motion also releases earnings.
So we have home building (Lennar and KB Homes), food and commodities in ConAgra and General Mills, retailing in Rite Aid and Bed Bath and technology in RIM..
That should give a good feel for the way some important companies in some vital sectors of the US economy see the outlook.
