The Reserve Bank’s deliberations and new economic forecasts dominate the week here, along with some important economic data and the December reporting season which moves into a higher gear.
Offshore, the important US employment data for January is the major bit of news – but that won’t be out until Friday night, our time, while the European Central Bank and the Bank of England also meet to look at interest rates.
We will also get the usual start of month survey results for manufacturing around the world. China’s two surveys are already out and confirm the pace of activity in the country’s manufacturing sector is slowing, but not contracting.
The Australian survey is out today and later on we will get figures for most Asian economies and then Europe and the US tonight – these will confirm that the economies in the eurozone and the US are rebounding quite nicely.
The monthly surveys of the services sector are out midweek and are expected to confirm a rebounding economy across Europe, the UK and US. A Chinese services survey is out later today.
Analysts will be watching to see if the emerging markets sell off last month has damaged demand and activity in both manufacturing and services, especially in countries like Turkey, Brazil, India and Thailand.
In Australia, the Reserve Bank is expected to once again leave interest rates on hold at its board meeting tomorrow (See separate story).
There’s just no reason to cut rates any more, the economy is making the transition from mining investment boom to domestic investment (mostly housing).
Interest rates have already been cut to record lows and evidence continues to build that rate cuts are getting traction in housing and retail sales.
On the data front expect the trend in building approvals, house prices (both out later this Monday) and retail sales (Thursday) to remain up in December. As well industry car sales figures for January are due out midweek.
Australian December half 2013 earnings results will also start to flow. JB Hi-Fi will confirm its bullish update of a week ago later today, while Argo Investments, the country’s second biggest listed investment company, releases its results as well. Country Road’s first half results are also out later today.
21st Century Fox and News Corporation report quarterly and half year results late in the week, while we will get the second quarter and half year sales figures from Woolworths on Thursday, which will help set the tone for the important retail sector.
Downer EDI releases its half-year results tomorrow, along with Challenger Diversified Property Group. Tabcorp half-year results are out on Thursday, a day after Echo releases its figures.
The AMP’s Dr Shane Oliver says that consensus expectations are "for 14% earnings growth in 2013-14 led by 35% growth in resources profits on the back of the lower $A and reduced capex and 8% growth for industrials, so earnings results should show signs of this turnaround starting to come through."
"Key themes are likely to be the benefits of the lower $A for miners and offshore earnings, early and tentative signs of top line revenue improvement, ongoing focus on cost control and solid dividend growth," he wrote at the weekend.
In the US, the major focus will be on the January payrolls report due Friday night, our time, which is expected to show a recovery from December’s weather affected gain of just 74,000 jobs.
But there was a lot of bad weather throughout January will could very well see a weaker than expected report for the month.
That will be something to consider and if it is weak, ignore and wait until the February data is released in a month’s time.
At the moment, US economists expect payrolls to gain 190,000 with unemployment remaining at 6.7%.
Both surveys of manufacturing and services are expected to remain solid in the US. Car sales figures for January are also due for release today.
And, Janet Yellen, the first woman to chair the Federal Reserve in its 100-year history, took over the reins of the US central bank on Saturday and will be formally sworn in tonight, our time. Yellen succeeded Ben Bernanke as Fed chairman on Saturday.
Besides the January jobs report, other major data include the December trade and figures, consumer credit, construction data, productivity and factor orders. The December figures will help flesh out the second estimate of US 4th quarter GDP due at the end of this month.
US 4th quarter earnings continue to flow this week, with media stocks to dominate, led by Time Warner, News Corp, 21st Century Fox, Walt Disney, and newspaper group, Gannett. As well General Motors reports, as does big fast food group, Yum Brands (which gets more than half its shares from emerging markets like China and Brazil).
Expedia, Kellog Co, Archer Daniel Midland (the company’s bid for Graincorp was rejected by Canberra)and cigarette giant, Phillip Morris International also report.
Also reporting this week, some of America’s major insurers, starting with Aflac Inc, Allstate Corp, Aetna Inc, Cigna Corp and Prudential Financial. Markets operators Nasdaq OMX Group Inc. and CME Group also report, while drug giant Merck & Co is down to report as well.
Thomson Reuters says that with half of the S&P 500 companies having reported earnings so far, "almost 70 percent have topped earnings expectations, above the long-term average of 63 percent. Two-thirds have exceeded estimates on revenue, above the historical average of 61 percent, though companies have generally been meeting or beating lowered expectations."
In Europe, both the Bank of England and the ECB are likely to leave monetary policy unchanged on Thursday, but the ECB is likely to signal it retains an easing bias.
The ECB is facing a difficult question about inflation – it continues to fall and hit an all time low of 0.7% in January, down from 0.8% in December and well below the ECB’s target of 2% a year.
Many European analysts and banks are now starting to worry mightily about the impact disinflation, or even deflation, could have on the emerging recovery.
Industrial production data are released in the UK, Germany and Spain, with the former two also seeing an update on their trade balance.
The Eurozone sees an update on retail trade while France also publishes an update on its trade balance.
Producer prices will be released for the eurozone, while Italy gets an update on consumer prices.
