The Week Ahead: For What Shall We Give Thanks?

This story features JAMES HARDIE INDUSTRIES PLC. For more info SHARE ANALYSIS: JHX

By Greg Peel

In Australia it is common acceptance that the “silly season” begins on Cup Day, which means we’re into it now. It is a time of winding down towards the summer holidays, of looking to square up the books, or trying not to do anything rash ahead of Christmas bonuses, and to party hard. In the case of Christmas bonuses, apologies to anyone employed by a US investment bank.

In the US, the silly season begins with Thanksgiving, which is on Thursday. As most US firms run on a calendar year, the silly season is very much a time not to lose any more money. This particular week will thus be punctuated by the full holiday on Thursday, and the equally effective though not official holiday on Friday. Friday is also a holiday in Japan, if that matters.

Let’s get Australia out of the way first, because nothing much is happening. Monday is October merchandise imports, and Wednesday brings October new vehicle sales and the Westpac-Melbourne Institute September leading economic index, which seems a tad pointless in mid-November (but extremely indicative, I’m sure).

In the US it’s another scary week of housing data, with the NAHB housing market index for November on Monday, and October housing starts and building permits on Tuesday. Wednesday brings the Michigan U consumer confidence measure for November and leading economic indicators for October, which are equally scary.

Wednesday also sees the release of the Fed minutes for the meeting at the end of October, the one in which rates were cut by 25bps. As the Fed provides only a brief summary of its reasons for monetary policy changes at the time, the minutes release provides the opportunity to comb through the several pages looking for more conclusive clues. It often means markets react twice to the same (now old) news, but the Yanks love it anyway.

The US as good as shuts up shop on Wednesday night.

In a case of what may or may not be important, all the finance ministers of the G20 are meeting in South Africa this weekend. In recent times the world has expected these meetings to result in some sort of concerted action or statement that will affect the fate of the US dollar, but they have tended to be simply big on motherhood statements. To date US Treasury secretary Hank Paulson has said nothing other than the standard party line, ie “a strong dollar is in the interests of the US”, but last week he was slightly more expansive, suggesting the US economy:

“…like any other, goes through ups and downs, but I believe the US economy is going to continue to grow and its fundamental long term strength is going to be reflected in currency markets… A strong dollar is very much in our nation’s interest.” (Courtesy of Dennis Gartman)

Dennis Gartman interprets this statement to mean Paulson has finally broken from polly protocol and hinted that the US economy may well weaken. It also suggests he still wants currency markets, not central banks, to sort out the dollar, which is what you’d expect from an old Goldmans man. Europe and the UK may have something strong to say, however, as a weak US dollar is playing havoc with their own export economies and inflation.

Is Europe behind the curve? There’s little to suggest Europe is not suffering the same credit crunch problems as the US. If the economies across the pond begin to slow, then inflation fears may also turn to recession fears and rates will need to be cut. So far only the US has cut while Europe has remained on hold. If the Fed holds back now, and Europe is forced to cut, watch for the US dollar to take off.

Stock-specifically in Australia we have results this week from James Hardie ((JHX)) and Lion Nathan ((LNN)). The build up of AGMs over the past couple of weeks turns to AGMania for the next two. All details in the FNArena calendar.

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