By Ben Potter, IG Markets

Looking ahead to next week, it’s pretty quiet in terms of important local economic releases. Overseas however, there are a few key reports due out in the US. On Tuesday, US retail sales data is due, which will give an insight into the health of the US consumer. On Wednesday, the FOMC meeting minutes will be released while on Friday, US building permit numbers are out.
Let’s have a brief look at what we’ve seen last week and where the market is currently positioned. The standout news was Wednesday’s Westpac consumer sentiment figure. The Consumer Sentiment Index jumped by 9.3% in July from 100.1 to 109.4 to be 38.5% higher than the same time last year. The jump was especially impressive as it came on the back of last month’s rise, which was the biggest in 22 years.
The data adds to the case that the Australian economy is well positioned for a steady and durable recovery, especially when it comes to consumer spending.
Also of interest was the unemployment data, which came in slightly better-than-expected. The unemployment rate ticked up to 5.8% from 5.7%, but below analyst’s forecasts of 5.9%. Incredibly, the Australian labour market has only shed a total of 55,300 jobs since the employment high, a stunning performance considering the unemployment in other stgeloped countries.
Clearly, the decline in total jobs is now decelerating. It’s very interesting to note that a few prominent analysts have begun to lower their unemployment targets, saying that they firmly believe the worst period of job cuts is now behind us. If this is in fact the case, then it’s potentially a big buy signal for Australian equities.
Looking at global equity markets, the current 10% pullback has prepared markets for worse-than-expected Q2 results. However, just like what we saw in Q1, many are starting to wonder whether this will actually be the case. Large piles of cash (approximately $25 billion locally) are beginning to get twitchy, wondering whether now is the time to pounce and start increasing their exposure to cyclical equities. It’s already started, with someone pushing the ‘buy’ button on Wednesday afternoon.