FYI | Apr 02 2007
By Greg Peel
A US decision to introduce tariffs on imports of Chinese paper products is likely to keep global investors on their toes this week with Chinese authorities already having responded with unusually sharp wordings.
As this has the potential to develop into something much bigger, and nastier, at a time when global economic growth is facing several other challenges, volatility on bond, currency and share markets could well increase in the short term.
The US decision opens the way for introducing tariffs on other Chinese import products and has been applauded by manufacturers, unionists and legislators in the country. The decision denominates China as a non-market economy, meaning its products are perceived as receiving improper government subsidies.
In Australia, the interest rate futures and currency markets have been angling towards a possible rate rise announcement from the RBA on Wednesday, but more economists than not have overcome an initial reaction to recent hawkish economic data and decided the RBA will still play the role of observer for the moment. March quarter inflation data will provide better guidance before such a decision should be leapt into.
May thus becomes a possibility but some economists are suggesting June or even July will provide a more sensible opportunity to readjust monetary policy if the data trend continues.
In the meantime, today will provide some more indication with February retail sales and building approvals due out, along with the Melbourne Institute inflation gauge for March. Treasurer Costello has also been scoring media time ahead of his intergenerational report which he will release today, giving further insight into what’s happening on the “ageing population” front.
As the RBA sits down for a chat tomorrow they will have the trade balance figure for February at hand. Wednesday morning brings their decision, along with the AIG performance of services index for March. The data dribbles out to Thursday with the March cash card retail index.
It’s a bit busier across the Pacific this week, kicking off tonight with March ISM manufacturing index and prices paid, with pending home sales on Tuesday. Wednesday sees the ADP employment change and ISM non-manufacturing index for March as well as February factory orders.
Nothing of note on Thursday, but Friday is the biggie with March figures for non-farm payrolls, unemployment and average wages, along with February wholesale inventories.
It was a quiet Friday night offshore last week providing little to spark off the week locally. Traders are likely to take it easy until Wednesday, barring no surprises, ahead of the rates decision. The media sector will be the exception however, as more posturing is expected ahead of Wednesday’s official relaxing of the rules.
The stand-off between Iran and Britain continues.