Savanth Sebastian – Economist – CommSec
Jobs jobs & jobs
· If it wasn’t for the employment data, the economic diary in Australia would be relatively empty. But the importance of the employment data cannot be overstated in the context of the upcoming November Reserve Bank Board meeting. On the global front the focus is very much on the Chinese economic growth figures due on Wednesday. In the US, housing and inflation data will take centre stage.
· The week kicks off in Australia on Tuesday when the Reserve Bank releases minutes of the Board meeting held a fortnight earlier. The Reserve Bank Board may have left interest rates unchanged for the second consecutive month, but there were more changes made to the accompanying statement. So investors are probably hoping that the new Reserve Bank Governor is more forthcoming in providing additional detail on policy discussions.
· Also on Tuesday the Australian Bureau of Statistics (ABS) will recast the industry vehicle sales data, providing seasonally adjusted and trend estimates, while Roy Morgan and ANZ will release the weekly consumer sentiment survey. Households remain relatively upbeat and healthy confidence levels should bode well for the retailers.
· In addition on Tuesday, the Reserve Bank Governor Philip Lowe will deliver a speech at Citi’s 8th Annual Australian & New Zealand Investment Conference, in Sydney (8:10am AEDT). Given it will be only the second public address as Governor it will be closely dissected by investors, traders and financial analysts.
· On Thursday, the ABS releases the September employment data. In recent months unemployment has been ticking modestly lower. In fact the jobless rate hit a 3-year low of 5.63 per cent in August. We tip job growth of around 15,000 in the month and the jobless rate to lift modestly to 5.7 per cent. A soft employment result and a super-low inflation outcome at the end of October could open the door for a November rate cut. However the anecdotal evidence suggests spending is lifting across the economy, and coupled with the lift in job vacancies, should result in a lift in hiring in coming months.
Overseas: Chinese economic growth to dominate attention
· There are healthy helpings of ‘top shelf’ economic data in both China and the US in the coming week with a number of speeches by US Federal Reserve Presidents thrown in for good measure throughout the week.
· In the US the week kicks off on Monday, with the release of New York Manufacturing index, US industrial production and capacity utilisation.
· On Tuesday, the US consumer price index (CPI) is issued alongside the NAHB housing market index. The “core” reading of consumer prices (excludes food and energy) may have risen just 0.2 per cent in September to stand 2.2 per cent higher over the year. And while the Federal Reserve focuses on the core personal spending deflator (excludes food and energy), a modest lift in inflation will continue to keep the discussion open on a December rate hike. The weekly data on chain store sales is also released on Tuesday.
· On Wednesday, there are three ‘top shelf’ indicators – US housing starts, building permits and the Federal Reserve Beige book. An encouraging 2.5 per cent lift in housing starts is tipped, while building permits may have edged higher by 1.1 per cent in September after falling by 0.4 per cent in August.
· Also on Wednesday, Chinese economic growth data is issued with the usual monthly readings on retail sales, production and investment. The Chinese economy expanded at a 6.7 per cent annual pace in the June quarter. Predictably growth will ease further in coming years to reflect maturation of the economy’s development. In terms of the other activity indicators retail sales should have continued its run of double-digit annual growth.
· On Thursday, existing home sales, the leading index, the Philadelphia Federal Reserve Business Outlook survey and the usual weekly data on new claims for unemployment insurance (jobless claims) are all slated for release. Overall flat to softer results are expected.Sharemarket, interest rates, currencies & commodities
· The US earnings season has begun – that is, the time when US listed companies release their latest revenue and profit figures. And yet again analysts are telling investors to brace for weakness. According to the S&P Global Market Intelligence unit, analyst forecasts suggest a 1 per cent annual decline in S&P 500 third quarter earnings – marking the fifth straight quarter of sliding earnings.
· Once again the energy sector is expected to lead the declines, with losses also forecast for real estate and industrial stocks. On the flip-side, materials and financials are expected to see more upbeat results.
· Amongst those companies reporting on Monday is Bank of America, IBM, Netflix, and Hasbro. While on Tuesday, Johnson & Johnson, Goldman Sachs, Yahoo!, Blackrock, Domino’s Pizza and Intel all issue profit results.
· On Wednesday, no less than 100 companies are expected to release earnings including, Morgan Stanley, EBay, American Express, Halliburton and Las Vegas Sands.
· On Thursday, Verizon, Microsoft, and PayPal are slated to report their earnings results. And on Friday, General Electric, McDonalds and Honeywell are amongst those to report.
Savanth Sebastian – Economist – CommSec