US jobs, the health of manufacturing around the world (especially in China), central bank meetings and Australian economic growth will be the dominant stories for markets to contend with in the coming week, along with the fate of the long mooted rise in US interest rates and Friday night’s US jobs report for August.
In Australia, the Reserve Bank meets tomorrow, the European Central Bank (ECB) on Thursday night and a couple of other central banks also hold meetings. No change will emerge in Australia or from the ECB.
But given the current intense interest in all things China, tomorrow’s release of the official monthly report of the health of Chinese manufacturing, and the final details of the private manufacturing survey from Caixin/Markit (and the services survey), will have a major impact on market sentiment.
These surveys will be the most watched of a series of survey reports for major economies around the globe, with those for the eurozone and the US to be closely watched as well.
But so far as markets are concerned, comments at the weekend by Fed vice chair Stanley Fischer about US monetary policy – no change, but watch the September 16-17 meeting of the central bank, which will dominate thinking from today onwards.
Fischer didn’t rule a rate rise in or out, but tried to leave a door open for a possible rise next month when he made the point that inflation would eventually move back to the Fed’s 2% target level and that the central bank had to move before that happened.
In Australia, tomorrow’s RBA meeting for September will leave interest rates. None of the 16 economists in an AAP survey late last week tipped a change in rates (reduction).
The AMP’s chief economist Dr Shane Oliver says of most interest will be any comments in the post-meeting statement from Governor Glenn Stevens “regarding recent financial market turbulence in relation to China/emerging market driven worries and in particular whether this suggests a strengthened easing bias”.
"My view remains that the probabilities are skewed towards the RBA having to cut rates again at some point. The continuing slide in the $A is only a partial offset to this,” Dr Oliver wrote at the weekend.
The week ahead is also a heavy one for Australian economic data – Wednesday’s GDP report in the June quarter national accounts will dominate.
But there’s June quarter current account data, business indicators and government finances to be considered today and tomorrow ahead of the GDP report on Wednesday.
We will also get the usual start of the month deluge of figures on the economy. Private credit figures today from the Reserve Bank for July as well as new home sales for last month (also today).
Home price growth for August tomorrow and building approvals for July (a solid 4% rise is tipped); on Thursday July retail sales growth (weak growth is forecast) and another large trade deficit is expected. Car sales figures for August will be out later in the week.
Economists are looking for GDP growth of 0.4% to 0.6%, but much will depend on Tuesday’s current account data which could see a big detraction from overall growth, instead of the boosts we have seen in the last two quarters.
In the US the focus will be on the August employment and jobless report, which is expected to show jobs growth of 200,000 to 220,000 and unemployment remaining unchanged at 5.3%. Watch wages growth and the participation rate.
This is the last jobs report before the Fed’s next meeting and so the focus is most likely to be on wages growth which is expected to remain soft at around 2.1% year on year.
Friday’s release of the Fed’s preferred core inflation measure showed no sign whatsoever of price concerns (the core measure was down to an annual 1.2% in the year to July from 1.3% in June). And there is no sign whatsoever of rising inflation pressures from wages either.
The survey of US manufacturing is out this week, along with the survey of services activity a couple of days later. US car sales figures for August will also be issued and will show another solid month of sales.
In Europe, August inflation data (Monday) could go negative again with core inflation also low. The ECB (Thursday) is unlikely to make any changes to monetary policy but is likely to acknowledge the downside risks to global growth from China and the emerging world and indicate it stands ready to ease more if necessary.
Final unemployment figures for the eurozone will be published tomorrow night. Final GDP figures for the June quarter are out on Friday night.
In Asia, the release of the surveys of manufacturing tomorrow will be watched closely, but non more so than the two from China – the official survey (which covers big companies) and the Caixin/Markit survey’s final report (which covers small companies).
The flash report from the Caixin/Markit survey 10 days ago showed a fall to a six year low of 47.1, which helped trigger the market instability of the past six or seven trading sessions.
The preliminary industrial output figures for Japan will be released later today.
On Friday G20 finance ministers and central bank governors will be in Ankara in Turkey to discuss global economic events and the forthcoming G20 summit in a couple of months time.
