On the face of it the coming week seems a bit light on for major statistical releases around the world, or major decisions from central banks or news from leading companies.
But the reality will be very much different, because the coming week is when the timing of the ending of the US Federal Reserve’s $US85 billion a month of stimulatory spending could very well start to take shape.
This will outweigh data releases in Australia, Europe and Japan which would normally be watched closely.
The Australian dollar was sold down on Friday in Asia and in Europe and the US and ended at 93.85 US cents, a cent and a half under levels reached mid-week and around a cent lower than the previous Friday.
The US dollar rose – sending the Euro down to seven week lows and US interest rates rose with the 10 year bond yield hitting 2.74% early Saturday.
But Wall Street ended with strong gains on Friday and the week as equity investors too the news of the better economic data in their stride.
That was a combination of the stronger than expected first estimate of US third quarter GDP of 2.8% (which was boosted by 0.8 percentage points by a run up in inventories) and the better than expected October jobs data, and sharp upward revisions in new jobs in August and September.
Other data has been solid – the surveys of US manufacturing and services have been better than expected and although consumer confidence has weakened, the overwhelming message is that the US economy is doing better than it was a couple of weeks ago, bringing forward the start date for the Fed’s tapering of its huge spending program.
And speeches and public appearances by Fed chairman, Ben Bernanke this week, along with a senior Fed official from the Atlanta Fed, and more importantly, the appearance Thursday night our time of Janet Yellen, the nominated successor for Dr Bernanke, before the US Senate banking Committee, the markets should have a clearer idea about the tapering schedule.
Some US analysts say the Fed will make more known at its two day meeting on December 17 and 18.
But Ms Yellen is due to succeed Dr Bernanke on January 31, so the Fed may lay out more detail, but leave it to her first Fed chaired meeting to make the announcement in March.
Either way the chances of an earlier than expected start to the tapering is definitely higher now than it has been since September when the Fed failed to make an announcement on tapering, as it was widely forecast to do.
The shutdown of the US government and the impasse over the debt ceiling seems not to have had much significant impact on the US economy’s expansion.
There now seems to be a growing acceptance that the US economy is doing enough to start the Fed on a slow tapering process.
For Australia it might be just enough to push the value of the Aussie dollar down past the 88.48 US cent low it reached mid year when fears about the fallout from tapering first erupted.
If that happens, the Reserve Bank will be happier, along with the Federal Government and much of our exporters and trade exposed industries.
Apart from the focus on the Fed, economic data releases this week in the US will be few.
Industrial production is out on Friday afternoon, US time and before that, the New York area Empire survey of manufacturing from the Fed.
The trade data for October and the US budget position, also for October, are due for release.
US third quarter reports are nearing the end with retailing set to dominate the week.
Walmart and Macys will be reporting, along with Kohl’s and Nordstrom.
We should have a good idea after these reports if the government shutdown and the fall in consumer confidence has had a serious impact on retail spending.
Reuters says that With results already in from 447 of the 500 companies in the S&P Index, the quarter’s estimated profit growth of 5.% will see little change.
In Australia, it’s also a quiet week with the monthly NAB survey of business conditions and confidence due out tomorrow and the Westpac survey of consumer sentiment on Wednesday.
The ABS produces its wage index for the September quarter which will show a further decline in wage growth.
The most important data release for the week here will be the housing finance report for September later today from the Australian Bureau of Statistics.
That will confirm the upsurge in finance for housing, but also another fall in first home buyers.
In the corporate area there’s a few more September 30 profits and AGMs.
Orica produces its full year earnings later today and tomorrow Incitec Pivot also releases its 12 month results, while Leighton has a quarterly update. CSI reports on Wednesday. On Thursday, James Hardie produces its second quarter and half year results.
AGMs will be held by companies including Lend Lease, NRW, BlueScope Steel, Mirvac, Ramsay Healthcare, Fortescue Metals, Aurizon, Seven West Media, Asciano, Mount Gibson Iron, BC Iron, Charter Hall and Perseus Mining.
Later today the Reserve Bank’s head of domestic markets, Chris Aylmer speaks at the Australian Securitisation conference in Sydney about developments in secured issuance and RBA reporting initiatives.
The new Federal Parliament kicks off tomorrow in Canberra.
In Europe, third quarter GDP estimates for the eurozone are due for release (Germany, France and Italy on Thursday night, our time), as well as industrial output a number of eurozone nations.
UK unemployment and the latest Inflation Report from the Bank of England are also due for release. As well, unemployment, inflation and retail sales data will also be released.
In Asia, the usual release of Chinese data is over. But Japan is due to release third quarter GDP estimates, along with industrial output and consumer confidence as well as machinery orders.
