The coming week will be another five days packed full with a long list of issues for investors to gnaw – US earnings, global inflation, jobs, economic growth and more central bank decisions.
Four US tech companies – Netflix, Tesla, Snap and Twitter – are among the first big week of America’s June quarter report season and they could very well set the tone for the season (see separate story
Mid-month surveys of manufacturing and service sector activity will be out Friday and will give an update on inflation, wages and cost pressures generally.
The business conditions surveys for July will be issued for the US, Europe, Japan and Australia are likely to show further signs of a slowdown and inflationary pressures easing in some areas.
In the US, futures market wound back the belief that the Fed will lift rates 1% at its meeting later this month – that has fallen from more than 70% after the shock 9.1% CPI was reported midweek to only a 20% chance by Friday.
Inflation and growth fears mesh again with the European Central Bank expected to increase its policy rate by 0.25% on Thursday, joining other central banks in rate hikes.
This will take its main refinancing rate to 0.25% and its deposit rate to – 0.25%. – a long way from the near 2% and 2.5% rates in New Zealand and Canada and the 1.35% in Australia, even though EU inflation is as high as that in the UK, NZ and the US.
The AMP’s chief economist Shane Oliver says the ECB’s guidance “is likely to foreshadow more rate hikes ahead despite the deterioration in the growth outlook.”
“It is also expected to unveil a mechanism to prevent spread widening between member country bond yields and market reaction may largely depend on how robust this is seen to be.”
In Australia, the minutes from the RBA’s last meeting are out tomorrow and a speech by Governor Lowe on Wednesday are likely to reiterate the RBA’s upbeat view of the economy.
This week also sees the release of some more production and sales reports from resource groups.
The most important will be the full financial year data on production and sales from BHP tomorrow.
Woodside and Santos could release their June quarter and half year figures this week as well – the sales figures will be huge.
Meanwhile the Bank of Japan is expected to leave monetary policy on hold on Thursday and remain an outlier among central banks.
Dr Oliver said “there is some risk that it may weaken its bond target given the plunge in the Yen.”
He forecasts Japanese inflation for June to fall to 2.4%yoy (from 2.5%) but core inflation is expected to rise to 0.9%yoy (from 0.8%)
The Central Bank of Russia will also meet this week but due to the invasion of Ukraine and the sanctions on Russia, the central bank’s actions are happening in a vacuum.
The central bank of Indonesia is forecast to lift its key rate by 0.25% this week.
In New Zealand, June quarter consumer price inflation is due this week and is tipped to be close top 7% from 6.9% in the March quarter.
Besides the US June quarter reporting season home builder conditions for July (today), housing starts (tomorrow) as well as the Philadelphia Fed manufacturing conditions index to improve slightly but remain weak.