Market Overview:Last week continued the theme of mixed performances from financial markets for the most part. Initially sentiment was relatively buoyant with most risk assets seeing gains through until the middle of the week. Unfortunately, Friday saw sentiment turn and stock markets came under intense pressure as a disappointing corporate earnings season played out in the US. The result of which was an interesting dislocation between the wider asset markets, and the foreign exchange market. The currencies performing relatively well in the face of the somewhat dramatic fall in equity indexes.
Last week was a relatively quiet one for economic news in Australia. The Reserve Bank of Australia (RBA) released the minutes from their previous monetary policy meeting and these were mostly unsurprising and point towards one further easing to the cash rate before year end, inline with interest rate market pricing. The Chinese economic indicators point towards a stablisation of growth indicators and this should be of direct benefit to the Australian export sector in the coming quarters. This weeks focus comes from Wednesday's release of the 3rd quarter inflation numbers and these will be closely watched.
Last week saw the the release of the materially lower than expected 3rd quarter inflation numbers in New Zealand. This is interesting as the new Reserve Bank of New Zealand (RBNZ) Governor Wheeler considers his statement that will accompany his almost certain unchanged monetary policy decision this Thursday. There have been increasing calls for the possibility of a further easing from the current 2.50% cash rate in the coming quarters, but this seems an unlikely scenario to my mind. The increasing momentum from the Christchurch rebuild, and the buoyant Auckland property market, are likely to stem further lowering in the inflationary pressure.
The US economy continues to show mostly positive signs for its lethargic recovery. Last week produced better than expected retail sales, industrial production and existing home sales numbers. The company reporting season has not been as positive, and this illustrates an environment of stubbornly low growth. Providing interest this week is the Federal Reserve (FED) and their monetary policy statement on Wednesday. No change to monetary policy is expected from the FED, but the comments will to closely watched ahead of the advanced 3rd quarter GDP numbers on Friday.
Europe remains a complex proposition to keep a handle on. Sentiment generally remains positive, although much of this is pegged to a Spanish approach for funding assistance. Last weeks EU summit actually produced a result of sorts in term of an agreement on the future on Euro-zone banking sector supervision. This initiates the path towards the ultimate goal of a Euro-zone banking union. This week will continue the focus on Spain, as well as revealing the latest manufacturing numbers on Wednesday.
Last week proved to be an interesting one for the UK economy. The latest inflation numbers provided the focus and they came out on expectation with a yearly rate of 2.2%. Unemployment claims numbers and retail sales data were both more positive than expected and the Unemployment rate surisingly droped to 7.9%, the lowest level in a year. Also of note were lower than expected public sector borrowing numbers. Recent signs have been more positive in the UK and indicate an emergance from their "double dip" recession. This should be confirmed on Thursday as the preliminary 3rd quarter GDP numbers are announced. Also of note this week will be comments from Bank of England (BOE) Governor when he makes an on the record speech late Tuesday. Generally a more positive enviroment in Europe will benefit the UK economy in the coming months, although this could quickly turn, if negative sentiment returns.
Last week was a quiet one for economic news in Japan. Bank of Japan (BOJ) Governor again hit the headlines with downbeat comments about both the domestic and international economies. Whilst acknowledging the worlds 3rd largest economy would emerge from its recent period of stagnation, the slowdown in China and Europe debt crisis clouded the outlook. Earlier today saw the trade balance numbers reveal a larger than expected trade deficit as exports to China fall. The next focus comes in the form of the monthly inflation numbers due for release on Friday.
Last week continued the recently patchy outlook for the Canadian economy. The Bank of Canada (BOC) business outlook survey revealed a tumbling in hiring ad investment intentions. Interestingly the latest housing numbers point towards a 15.1% fall in the number of house sales as the property market starts to materially slow. This will be welcomed by the BOC as they have struggled with the housing market momentum in some provinces. The inflation numbers were lower than expected and ease the way for a more neutral stance from the BOC at their monetary policy meeting on Tuesday. Also of note has been the weekends news that Canadian authorities have denied the initial application from a Malaysian state firm to buy some significant oil and gas assets. With other deals yet to be tabled for the consideration, this potentially could have significant impacts on demand Canadian dollars in the coming months.
Major Announcements last week:
- Chinese Inflation 1.9% YoY as expected
- US Retail Sales 1.1% vs .6% expected
- NZ Inflation .3% QoQ vs .5% expected
- UK Inflation 2.2% YoY as expected
- US Inflation .1% MoM vs .2% expected
- Chinese GDP 7.4% as expected
- UK Retail Sales .6% vs .4% expected
- Canadian Inflation .2% MoM vs .3% expected