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Investor signposts: Reserve Bank decides on interest rates

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In Australia ‘top shelf’ indicators make a return in the coming week and the Reserve Bank Board meets to decide interest rate settings.

The week kicks off on Monday when the Reserve Bank releases the Financial Aggregates publication – a publication that contains private sector credit (lending) data and money supply figures. New home sales data for June will also be issued by the Housing Industry Association 

On Tuesday, CoreLogic releases the latest data on home prices together with the Performance of Manufacturing data. 

On current indications, Australian home prices may have posted another solid rise in July, up by around 1.6 per cent. The daily data indicates that Melbourne prices have lifted 3.1 per cent so far in July with Sydney prices up by 1.5 per cent.

The weekly consumer confidence data from ANZ and Roy Morgan is also issued on Tuesday. At present consumer sentiment is at a 5-month high.

Also on Tuesday the Reserve Bank Board meets. Rewind twelve months and the RBA were cutting rates. Now the expectation is that the next move in rates will be up, not down.

But the speculation is a little premature and we expect the Board statement will be more balanced about how the economy is performing at present.

On Wednesday, the Australian Bureau of Statistics (ABS) will issue data on building approvals – a leading indicator of home building. And the Federal Chamber of Automotive Industry releases data on new car sales for July. Car sales are rising because affordability is the best on record.

On Thursday the ABS releases the June trade data – figures on exports and imports. Australia is paying its way in the world at present with exports exceeding imports. And there is even the possibility that the broader current account may record a surplus in the June quarter for the first time in around 40 years.

On Friday, the ABS releases the retail trade data for June. Not only will the monthly figures be released but also the June quarter spending estimates for the volume of goods sold as well as data on retail prices.

Also on Friday the Reserve Bank releases the quarterly Statement on Monetary Policy. Not only does the report contain the latest economic assessment, but it also includes the pivotal inflation and economic growth forecasts that ultimately determine where interest rates are headed.

New month: attention shifts to US jobs

The calendar clicks over from July to August, so that means the US jobs report and global purchasing manager surveys are scheduled for release.

And the data releases kick off on Monday, when the Chinese National Bureau of Statistics releases the purchasing manager surveys for manufacturing and services. The private sector Caixin version of the manufacturing purchasing manager’s survey is released on Tuesday with the services sector index issued on Thursday.

In the US, the week begins on Monday with the release of the Chicago purchasing manager’s survey and the pending home sales index.

On Tuesday in the US, the personal income and spending figures for June are released with a 0.3 per cent lift in income tipped to outpace a 0.2 per cent lift in spending. The Federal Reserve’s preferred inflation measure – the core personal consumption deflator (excludes food and energy) – is also issued.

Also on Tuesday in the US, data on construction spending is released with the ISM manufacturing survey, new vehicle sales data and the weekly survey of chain store sales.

On Wednesday, the ADP National Employment index is released – a key measure of private sector payrolls. While not always lining up, the ADP survey is seen as a guide to the ‘official’ jobs data (to be released on Friday). The ISM New York index is also issued on Wednesday with weekly home finance data.

On Thursday, the Challenger series on job layoffs is released in the US with factory orders, the ISM services index and the weekly data on new claims for unemployment insurance.

But most investors are waiting for Friday when the non-farm payrolls (employment) data is released in the US. Economists tip an 180,000 lift in jobs, a 0.3 per cent rise in wages (earnings) and a fall in the jobless rate from 4.4 per cent to 4.3 per cent. That combination of figures may provide a boost to the US dollar and again put the Federal Reserve on course to lift interest rates.

Sharemarket, interest rates, currencies and commodities

The US earnings season continues in the coming week. Amongst stocks to watch are Loews Corp (Monday); BP, Honda Motor, Pfizer, Apple, Genworth Financial and ResMed (Tuesday); Office Depot, Time Warner, Tesla (Wednesday); Yum Brands, Hyatt Hotels, Kellogg (Thursday); and Berkshire Hathaway (Friday).

The Australian earnings season also cranks up in the coming week. Stocks to watch include Navitas, CYBG Plc (Tuesday); Rio Tinto, BWP Trust (Wednesday); Suncorp, Downer EDI (Thursday); Crown Resorts, Tabcorp (Friday).

Published: Friday, July 28, 2017


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