Global economic highlights and market insights for the week ahead

Company News

by Glenn Dyer

US inflation returns to center stage this week, as do US second-quarter earnings, while the June and June quarter economic reports from China start appearing.

There’s also another interest rate decision from New Zealand mid-week.

Markets will have to come to terms with the second-round results from France’s parliamentary elections. European markets, led by the Paris exchange, rose last week despite gains made by the hard right.

The shift to the center in the UK elections will not impact France, where the country is gripped by angst about immigration, globalization, and a reluctance to follow the rest of the world and work past an early retirement age.

In Australia, a quiet week is expected. Housing finance data will be out later today; the NAB monthly business survey and the Westpac/Melbourne Institute consumer confidence survey will both be out tomorrow.

The US sees the June Consumer Price Index released on Thursday and the Producer Price Index the day after.

The AMP’s Shane Oliver says the CPI is forecast to ease to 3.1% from 3.3%, with core inflation steady at 3.4%.

"Producer price inflation (Friday) is also expected to show a slowing in the annual rate,” he added.

The US June quarter reporting season will start to get underway this week with reports from Pepsi, Delta, Conagra, and three big banks releasing their reports on Friday: JPMorgan, Wells Fargo, and Citi.

Dr. Oliver wrote at the weekend, “Consensus expectations are for a 7.8% year-over-year rise in earnings, which is likely to end up being around 10% year-over-year again. Excluding tech, the consensus expectations are for 2.5% year-over-year growth.”

Outside the US, there are important quarterly reports from Nomura, the big Japanese investment bank; airline Cathay Pacific; Japan’s Fast Retailing (Uniqlo); and Sweden’s Ericsson.

The big danger from the French poll is if the hardline right forms a government after winning enough seats or going into a coalition with another party, triggering economic and political instability in France, a surge in French and German bond yields, and causing the European Central Bank to leave rates on hold instead of adding to its June rate cut.

There’s no rate cut expected from the Reserve Bank of New Zealand from Wednesday’s meeting, and the official cash rate will remain at 5.5%.

June and June quarter data starts flowing this week from China, with figures on trade, loans, car sales, and inflation—both Consumer and Producer prices.

Dr. Oliver says, “Chinese inflation for June (on Wednesday) is expected to remain weak but edge up slightly to 0.4% year-over-year (from 0.3%) with producer price inflation at -0.8% year-over-year (up from -1.4%).”

Trade data on Friday is expected to show a slight improvement in export and import growth.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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