Focus will return to the US Federal Reserve this week on whether it will lift interest rates or leave them alone – which is the tip from most analysts.
In fact the US dominates the week with the first estimate of third quarter GDP being released, and the third quarter reporting season which has seen a jump in the performance of tech companies, making Wednesday morning’s report from Apple very important to investor sentiment.
In Australia the inflation data for the third quarter is out on Wednesday, but the big corporate news this week will be the annual earnings reports from two of the big banks – the NAB and the ANZ – on Wednesday and Thursday respectively.
Watch also for a possible further easing from the Bank of Japan on Friday – it’s not certain, but the odds are rising of such a move being forced from the Bank of Japan by the country’s weak economic position.
The Fed’s decision will be announced in the early hours of Thursday morning and is expected to see the US central bank leave rates on hold.
That will be a decision not at odds with thinking about the US and global economies.
December could now be the month for a possible increase, but if the ECB expands its spending and cuts rates at the start of the month, the US central bank could be hamstrung from agreeing to a rate rise.
Last week’s big hint from the European Central Bank that it could expand its quantitative easing in December and further cut Eurozone interest rates, and then China’s surprise interest rate cut on Friday night, means a rate lift by the Fed this week is highly unlikely.
A few hours after the Fed decision is known the Reserve Bank of New Zealand produces its latest monetary policy decision and while a rate cut wouldn’t surprise (it would be the 4th in a row), a sit and wait decision is also possible because of the rebound in global dairy prices and the continuing concerns about the Auckland property bubble.
The Fed will have the first estimate of US third quarter GDP for this week’s meeting as it is out on Wednesday morning (US time), a few hours before the Fed decision is known. US GDP is tipped to have grown by around 1.7% (annual), more than half the final second quarter figure of 3.9%.
The AMP’s chief economist Dr Shane Oliver says that other US data this week includes weaker new home sales (out tonight, our time), flat September core durable goods orders, a modest rise in home prices, a slight fall in consumer confidence (all Tuesday night), pending home sales (Thursday night) and the key private consumption data on Friday night (which includes the private consumption deflator and employment cost index, both of which are watched closely by the Fed).
The third quarter profit reporting season continues with more than 90 S&P 500 companies reporting, led by Apple and Twitter, and big oil groups such as Shell, BP, Chevron, ConocoPhillips and Exxon Mobil. The third quarter reporting season also continues across Europe, the UK, Japan, China, and the rest of Asia.
In the eurozone, economic confidence measures are expected to have remained reasonably solid but inflation for October to have remained around zero, or even in a slight deflation (all are out on Thursday night).
The Bank of Japan meets on Friday and while it is expected to leave monetary policy unchanged, the AMP’s Dr Shane Oliver says, “another October surprise easing like last year’s is possible”.
Japan’s weak economy will be underlined by the release of industrial production data on Thursday and data for inflation and jobs on Friday.
In China, the Fifth Plenum of the 18th Chinese Communist Party Congress (starting later today) will consider the new five year plan to run to 2010. Five days of debate on that and other issues is on the cards.
And although nothing official will be released until next March when China’s parliament holds its annual meetings in Beijing, enough detail will be leaked to get a good idea.
So watch for informed reports about the downwards revision in the annual growth target for the next five years from 7% to 6.5% and for further economic reforms, especially in State Owned Enterprises.
In Australia the main economic focus will be September quarter inflation data on Wednesday which is expected to show an 0.6% quarter on quarter rise driven by higher prices for imports items including travel costs (from the lower $A), housing construction and tobacco, partly offset by falls in petrol and electricity prices.
New homes sales figures for September are out from the industry on Thursday, along with import and export prices, and a good idea of how our terms of trade went in the September quarter.
That will leave headline inflation around 1.6% year on year with underlying inflation measures remaining benign at 0.5% quarter on quarter and 2.4% over the past year. September quarter producer price inflation on Friday is likely to show a low level of price pressures. Friday also sees the release of the September private credit data from the Reserve Bank.
Annual meetings continue and there will be a smattering of results, starting with the Ten Network later today, the NAB and ANZ on Wednesday and Thursday and BT Investment Management later in the week as well. Macquarie Bank reports on Friday and will confirm a record half year and forecast a record full year profit.
The bank results will go a long way to helping the local market higher in coming days, especially if they conjure up dividend increases, as Westpac did, while stinging mortgage holders for more money.
Telstra has an investor day on Thursday and Woolworths releases its first quarter sales the same day.
