Europe of course will dominate the week ahead as the fallout from last week’s summits continues, and the impact of the move by Britain to stand alone and not participate is examined by markets.
But hopefully the eurozone’s woes won’t have the same level of impact as it did last week.
That’s not to say the issue won’t be there adding to the continuing lack of confidence markets have at the moment.
It’s why market surges like we saw again in Europe and the US on Friday night have to be taken with a grain of salt until there’s a flow of consistently better news from the eurozone and that won’t come for months and months.
The European Central Bank head Mario Draghi makes his first major speech this week since taking up the job last month and his comments on monetary policy, the economic outlook for the eurozone and of course, the current crisis, will be watched closely around the world.
European Council president Herman Van Rompuy is due to speak tonight.
And Opec members meet in Vienna mid week for their regular half yearly discussion of the oil market.
But the US looms as the major area of international interest this week, especially with the Federal Reserve holding its last meeting for the year.
Unlike the previous meeting, this one will be held against a backdrop of better economic news than for the past six to nine months. Jobs are growing, consumers seem to be spending a bit more freely, exports remain solid, but housing and construction remain depressed with house prices still falling for a third time in five years.
The expectation is that the Fed won’t do anything except make slightly more optimistic observations about the economy in its post meeting statement.
Estimates for US fourth-quarter growth are around the 3% level (annual) as a result of the improved flow of economic data in the past month.
That compares to the 2% annual estimate for the third quarter (to be updated next week).
After a drop in the unemployment rate in November as well as encouraging news from manufacturing surveys and better-than-forecast reports on jobless claims, wholesale inventories, and even the long-beleaguered construction industry, optimism is higher in the US than at any time for the past few months.
In fact it’s a re-run of how we finished 2010, only to see the economy start wobbling in the second and third quarters of this year.
Besides the Fed’s meeting, this week also sees November retail sales, consumer and producer prices and industrial production and December surveys of Philadelphia- and New York-area manufacturers, plus the usual weekly jobless claims.
That means a lot of data to be assessed by investors and hopefully will go someway to offsetting the negativity from Europe.
It will pay to keep an eye on profits and sales updates from US and European companies ahead of the December quarter and half year reporting season which starts in a month’s time.
We in Australia know that many December half year and second quarter figures here will be lower because of the number of negative updates in the AGM season.
But more will flow from just after Christmas through December.
Late Thursday, tech giant Texas Instruments (TI) cut its revenue outlook for the current quarter, citing lower demand, while chemical major DuPont on Friday lowered its full-year profit forecast.
In Germany, specialty chemicals group Wacker Chemie also cut its outlook, with this important industry worried about slower global growth and falling orders, domestic and export.
And on Friday in the US chipmaker Lattice Semiconductor Corp joined TI in cutting its fourth-quarter revenue outlook.
Reuters reported over the weekend that fourth – and first-quarter (2012) earnings growth estimates for Standard & Poor’s 500 companies have fallen sharply since July.
Earnings are now expected to increase 10.1% for the fourth quarter, down from a growth estimate of 15% at the start of October and from an estimate of 17.6% in July, according to Thomson Reuters data.
Sales estimates are also dropping. Banking and finance will again be especially weak for the third quarter in a row.
Reuters says negative updates from companies have been outpacing positive ones by the biggest ratio since the second quarter of 2001.
That’s a bearish sign in normal circumstances, but the current time isn’t normal, so the impact of a flood of weak results from next month could have differing impacts on various sectors, ranging from relief for banks if they do a bit better, to gloom if manufacturers and retailers produce lower than expected figures.
In Australia, Reserve Bank Governor Ric Battellino makes the last speech from an RBA official for the year in Sydney on Wednesday.
It will of course be examined closely for any update on the central bank’s views on interest rates, especially in the wake of the latest deal in the EU and eurozone.
Trade data for October will be issued by the Australian Bureau of Statistics later this morning.
Look for another solid surplus for the month, but some analysts warn that the slide in global iron ore and coal prices should start appearing in the data which will chop the size of the surplus if it is a large impact.
Housing finance figures for October are also out later today and should show a small fall in loans.
Tuesday sees the ABS release September quarter building approvals data and September quarter housing starts figures. Both will make gloomy reading for anyone looking for an upturn.
Lending finance data for October will also be out tomorrow from the ABC and the NAB’s business
