Normally the second last week in every month is a bit of a quiet time for most markets with only the odd statistics or central bank report or speech to disturb things.
At some times during the year earnings reports can provide some breakthrough news.
This week though there’s the still very present fear of what bond markets are telling us – there’s a lot of fears around about recession, worries about the Chinese economy, events in Hong Kong, the Middle East, Donald Trump’s trade wars, with China, his stupid idea about ‘buying’ Greenland and messages from the flow of June 30 earnings reports around the world.
Normally the major global news event in the third week of every month is the first estimates monthly business conditions – which we will again see this week.
Their importance has been magnified this month by last week’s spread of fears about a future slowdown or even recession with the German economy contracting slightly in the June quarter and surprisingly weak data from China for July.
That further unsettled already nervy bond markets to the point where the yield curve in some countries inverted (longer-dated interest rates fell under the key short term rates, starting with the key rate from the local central bank).
That sparked a new round of fears mid-week and even though markets settled on Friday and took a breather, nerves are still frayed.
So a lot more attention this week will be on the US Federal Reserve’s annual Jackson Hole seminar in Wyoming from Thursday to Saturday with chair Jay Powell due to speak on Friday night, Australian time.
US markets expect him to continue signally that more rate cuts are ahead this year from the Fed.
The G7 summit will be held this weekend in southern France – no prizes for guessing what will be on the agenda.
Will anyone take note of Britain and its PM Boris Johnson who is more intent on leaving the EU and ignoring the economic costs of that decision even though the UK economy has started contracting.
Then there are those flash surveys for business conditions for the US, Eurozone, Japan, and Australia on Thursday. Will the message that parts of the global economy are indeed slowing?
There’s also monetary policy meeting minutes for August from the Fed, the Reserve Bank of Australia and the Reserve Bank of India. The central bank of Indonesia releases its latest monetary policy decision later this week as well.
Japan’s July trade and inflation updates will be released this week as well.
The AMP’s chief economist, Dr. Shane Oliver says “Central bankers and monetary policy will no doubt be in focus over the next week with the Fed’s annual central bankers’ get together in Jackson Hole on 22-24 August.
“There will clearly be no difficulty filling out the topic which is “Challenges for Monetary Policy” and there is likely to be lots of discussion about continuing low inflation and threats to growth from Trump’s trade wars and what to do about.
“The minutes from the Fed’s last meeting (Wednesday) are likely to lean dovish (despite being a bit dated given the escalation of the trade war since then) and comments by Fed officials including Fed Chair Powell on Friday and other central bankers at Jackson Hole are likely to signal further monetary easing ahead.”
Besides the business surveys, it’s a quiet week for US data – existing and new home sales figures, plus the embers of the June 30 quarterly reporting season.
In Australia, the message from the RBA board minutes is well known from the latest Statement on Monetary policy, Governor Lowe’s appearance before the Federal parliamentary economic committee and the speech last week from deputy governor Guy Debelle.
Governor Phil Lowe is due to speak at the Jackson Hole symposium later this week and the message will be as we saw in the monetary policy statement is likely to be that it remains dovish.
Both are likely to repeat guidance that rates will remain low for an extended period and that its bias is to ease monetary policy further.
On the data front, skilled vacancies will be released Wednesday and those business conditions surveys for this month are out on released Thursday.
And the June 30 reporting season hits its peak this week with around 115 ASX 200 companies due to report (see separate story).