AU Data
- Monday 10.30 Melbourne Institute Inflation Gauge previous -0.1% m/m
- Monday 11.30 House Price Index previous -0.8% q/q
- Tuesday 11.30 Building Approvals previous 7.8% m/m
- Tuesday 14.30 Interest Rate Decision current 3.00%
- Wednesday 11.30 Retail Sales previous -2.0% m/m
- Wednesday 11.30 Trade Balance previous 2.11B
- Thursday 11.30 Unemployment Rate previous 5.7%
- Friday 11.30 RBA Monetary Policy Statement
Two surveys last week highlighted the outlook for Australian business remains very gloomy. The NAB’s Quarterly Business survey headlined with an improvement in Confidence (lagging indicator) for Q1 at -24 from -42, but the sub-indices for Forward Orders and Employment (leading indicators) recorded their lowest levels since 1991. The AIG’s Manufacturing Index (30.1 from 33.4) underpinned the view that the worst is still to come by hitting a record low and contracting for the 11th straight month with New Orders and Sales both continuing to fall. New Home Sales (+4.2% m/m) continue to be supported by government incentives but concern remains that this may be a false economy in the longer-term, as general house prices remain expensive and with unemployment forecast to rise above 8%, a price correction for this asset class is more likely than not. Overall, pressure on the RBA to continue monetary easing is not receding but the market is split 50/50 between no change and another 25 basis points this Tuesday.
NZ Data
- Monday 08.45 Labour Cost Index previous 0.7% q/q
- Tuesday 13.00 ANZ Commodity Prices previous 1.0% m/m
- Thursday 08.45 Employment Change previous 0.9% q/q
- Thursday 08.45 Unemployment Rate previous 4.7%
New Zealand Business Confidence posted its biggest gain in more than 16 years in April, as tax cuts and lower borrowing costs made companies less pessimistic about consumer spending, profits and hiring. A net 3.8 percent of companies surveyed expect sales and profits to decline over the next 12 months from 21.2 percent in March. Fewer businesses said they plan to reduce workers and cut capital spending, adding to signs the economy may recover later this year from the worst recession in more than three decades. However as one ‘green shoot’ appeared another shrank as Building Consents (-4.6% m/m) fell for the third time in four months and reversed February’s encouraging gain of 11.7% m/m. The RBNZ remain far from convinced about any nascent economic recovery and cut rates by another 50 basis points to a new record low of 2.5%. The post-decision statement signalled that rates were likely to remain low for some considerable time. Employment data will be the focus of attention this week.
US Data
- Tuesday 00.00 Pending Home Sales previous 2.1% m/m
- Tuesday 00.00 Construction Spending previous -0.9% m/m
- Wednesday 00.00 Fed Chairman Bernanke Testifies
- Wednesday 00.00 ISM Non-Manufacturing PMI previous 40.8
- Wednesday 22.15 ADP Non-Farm Employment Change previous -742K
- Thursday Tentative Bank Stress Test Results
- Thursday 22.30 Unemployment Claims previous 631K
- Friday 05.00 Consumer Credit m/m previous -7.5B
- Friday 22.30 Nonfarm Payrolls previous -663K
- Friday 22.30 Unemployment Rate previous 8.5%
- Friday 22.30 Average Monthly Earnings m/m previous 0.2% m/m
- Saturday 00.00 Wholesale Inventories previous -1.5% m/m
Last week saw broadly negative data from the US, as home sales posted further losses and durable goods fell by 0.8%. Despite this equity markets finished the week strongly on returning risk appetite. This week there is a plethora of releases, with Thursday Fed Funds announcement likely to be the focus of the markets attention. Wednesday’s Advance GDP number will also be closely observed as the market attempts to gauge whether recent optimism is justified.
JP
N Data
- Tuesday 9.50 Retail Sales previous -5.7% y/y
- Thursday 9.15 Manufacturing PMI previous 33.8
- Thursday 9.50 Prelim Industrial Production previous -9.4% m/m
- Thursday Tentative Overnight Call Rate previous 0.10%
- Thursday 15.00 Housing Starts previous -24.9% y/y
- Friday 9.30 Household Spending previous-3.5% y/y
- Friday 9.30 National Core CPI previous 0.0%
- Friday 9.30 Unemployment Rate previous 4.4%
The market continues to take comfort from signs that the very rapid pace of contraction in US economy is starting to slow. Three measures of manufacturing activity around the country recorded improved levels; the Richmond Manufacturing Index (-9 from -20), the Chicago PMI ( 40.1 from 31.4) and ISM Manufacturing PMI (40.1 from 36.3) all remained solidly in contraction zones but hints of a potential bottom encouraged equity investors to drag stock indices to levels not seen since mid February. The MSCI World Equity Index rose 11.5% in April, which is the biggest gain in its 20-year history. The Federal Reserve left rates unchanged last week and the post-decision statement was cautiously optimistic, but a private survey published by the Economic Cycle Research Institute rose to -18.6% annualised, which is the highest level in over 6 months and prompted them to boldly state that the recession will probably end before the summer is out. Others remain very much more sceptical that the ‘green shoots’ can develop into a sustainable recovery, pointing out that even a 50% recovery in the Dow Jones from the low of March 8, 2009 (6,470) would still only rank as a bear market rally. This week the markets will focus on the outcome of stress tests on US banks and the jobs data on Friday.
Interest rate outlook
| Country |
Current rate |
Last change |
Date of change |
Next meeting |
| AUS (RBA) |
3.00% |
-25bps |
07/04/09 |
5th May |
| NZ (RBNZ) |
2.50% |
-50bps |
30/04/09 |
11th June |
| US (FED) |
0-0.25% |
-75bps |
16/12/08 |
24th June |
| JPN (BOJ) |
0.10% |
-20bps |
19/12/08 |
22nd May |