In any week, the final meeting of the year of the US Fed’s key policymaking committee would normally dominate events, but this week global markets will be more concerned with the slide in oil prices and the way they are sending shares and bond prices lower.
For Australia, we’ll be interested in offshore events, but first we have to get through today when Federal Treasurer Joe Hockey delivers what’s expected to be a gloomy mid-year economic update, complete with bigger deficit and debt, courtesy of the sluggish economy.
There’s also the fallout from yesterday’s elections in Japan, results of the stress tests on UK banks conducted by the Bank of England, the usual mid month updates of activity from manufacturing around the world including the important one from China, the minutes of the final Reserve Bank board meeting, some big bank annual meetings, while the fate of the struggling Ten Network could be revealed at Wednesday’s AGM in Sydney.
In Australia, the mid-year economic update will be issued at 12.30pm today.
We can expect a bigger deficit, some spending cuts and lots of soothing words from the Federal Treasurer, in sharp contrast to his doom and gloom hectoring a year ago.
The Bureau of Statistics releases reworked industry data on new car sales in seasonally adjusted and trend terms later today. The industry data revealed that 92,232 vehicles were sold in November, down 2.2% on a year ago.
Tomorrow, the Reserve Bank board minutes of the last board meeting. Usually there are few surprises, but analysts will dissect this set of minutes, particularly when it comes to comments on the Australian dollar and on the health of the economy.
Reserve Bank Assistant Governor Guy Debelle delivers a speech tomorrow to a finance industry conference in Sydney in what will be the final public comment from an RBA executive until February.
Financial Inquiry chair David Murray is at the same conference.
On Wednesday, November data on imports is released, and on Thursday the Bureau of Statistics issues a number of economic updates: the quarterly financial accounts, detailed employment data from the monthly jobs report and the latest population data.
In the corporate area, annual meetings will be held by the two big banks ANZ and NAB on Thursday and Ten Network on Wednesday, where a long mooted takeover offer should emerge. As well, Elders, GrainCorp and Treasury Wine Estates also hold their meetings.
New Zealand releases its third quarter GDP figures later this week.
In Asia, there’s the results of yesterday’s election in Japan which would have normally seen the yen fall and the Tokyo stockmarket rise – if it hadn’t been for Wall Street’s plunge on Friday night as oil prices hit new lows.
Those lower oil prices are going to intensify the re-emerging deflationary pressures in Japan and put new pressures on the economic policies of Prime Minister Abe and his new government.
The Bank of Japan publishes the latest results of its Tankan business sentiment survey. It will not be good news for the economy or the government as business investment has not been solid in Japan for months.
Markit also releases flash manufacturing PMI data for Japan, which will give further insight into fourth quarter trends after November’s data showed Japan’s factories enjoying another month of moderate production growth, easing fears that the country’s recession extended into the fourth quarter.
The Bank of Japan holds its last monetary policy meeting of the year and the latest trade figures are out midweek.
In China, the release of flash PMI data from HSBC/Markit will provide a timely update on whether manufacturing growth picked up in December after November’s dip.
Official data last week showed factory output rising at the second-weakest rate in November since 2009 and weaker than forecast inflation, as well as surprisingly weak export and import figures.
In the US, there’s the release tonight, our time, of the Empire State manufacturing survey covering the north-east of the USA. On the same day capital flows data, industrial production and the National Association of Home Builders index are expected.
Tomorrow night, our time, data on housing starts and building permits are due to be released. Economists expect that starts to have slowed a little in October after the 6.3% jump in September. Similarly, an 0.9% lift in building permits is forecast.
Also on Tuesday, the Markit, in association with HSBC in most cases, releases the usual mid-month or ‘flash’ manufacturing indexes for China, European countries and the US. The Fed’s two day meeting also starts in Washington.
On Thursday morning, our time, the focus will be on the US Federal Reserve board meeting, with the rate decision handed down 6am, Sydney time.
This meeting will see updated forecasts for the US economy on growth, inflation and jobs.
Markets will be looking for clues as to when the Federal Reserve will lift rates after the end of the quantitative easing program.
Central to that is the Fed’s promise to keep interest rates low for a "considerable time".
Economists say that phrase could be retired after a better than expected payrolls report showed the US labour market in stronger shape than thought and the higher second estimate of US growth, plus the low inflation readings.
These will be closely watched, especially the inflation and jobs forecasts because they give clues as to the Fed’s timing for its interest rate move. Plus there’s the usual media conference by chair Janet Yellen that takes place half an hour after the decision is released.
Just before the Fed announcement, the main measure of US inflation, the consumer price index, will be released.
Economists expect that the CPI fell by 0.1% in November and annual inflation of just 1.6%, with lower oil prices a major factor, as they were in last week’s 0.2% fall in producer prices.
If volatile items like food and energy are excluded, core inflation is forecast to have risen 0.2% in November.
On Thursday night, our time, the influential Philadelphia Federal Reserve survey, the leading index and ‘flash’ manufacturing gauge, is released.
Earnings come from a disparate group of companies including Oracle, General Mills, Nike, Conagra, Blackberry, Accenture. Rite Aid and Fed Ex.
In the UK, Bank of England Governor Mark Carney will reveal the latest findings from the Bank of England’s bank stress tests on the county’s eight top banks.
The tests include a 35% fall in residential property prices and a jump in interest rates. The results are out tomorrow night, our time.
In Europe, the final inflation numbers for November will be released for the Eurozone, after an initial flash estimate showed consumer prices rising just 0.3%, thanks to lower energy prices.
Other important data releases for the eurozone include the Ifo Index in Germany, INSEE business climate data in France and industrial orders numbers in Italy.
And after Friday, it’s down the straight to the Christmas New Year break.
