The Week Ahead: Over to You Ben

This story features WESTPAC BANKING CORPORATION. For more info SHARE ANALYSIS: WBC

By Greg Peel

A growing belief that the Fed will cut its funds rate by only 25 basis points this week, rather than the 50-75 we’ve become used to, is helping to fuel a rally in the US dollar and the stock market. It matters little that the Fed’s motives might be more to do with spiralling inflation and a collapsing US dollar. The market will perceive that a cut of only 25bps means the troubled financial system is stabilising.

Thus financial stocks have been the flavour of the month these last few sessions. It remains to be seen whether this will prove another false start like so many before. Key to the mood ahead will be the Fed’s accompanying rhetoric. Any hint the Fed feels its actions to date have led to stability and even improvement in credit markets will be jumped on, as will any hint this rate cut could be the last. There is also plenty of grist for the mill this week in the shape of US economic data.

Tuesday starts the ball rolling with April consumer confidence. Ahead of the rate decision on Wednesday will be the first shot at the first quarter GDP – a number that can be later revised. Will it be negative? Wednesday also sees the first quarter core personal consumption expenditure (PCE) which is another inflation indicator, and the Chicago purchasing managers’ index.

Thursday brings the March core PCE, personal income and spending and construction spending for March, and the April ISM manufacturing index. Friday sees March factory orders, April vehicle sales, and the employment data for April. If the jobs figure is bad, the wind might just come out of the sails.

Japan also makes a rate decision on Wednesday but, once again, no change is expected.

It’s an uneventful week in Australia on the data front. Wednesday sees March credit aggregates and HIA new home sales for March. Thursday brings March building approvals and the AiG performance of manufacturing index for April. Friday is March retail sales which, if the evidence to date is accurate, will not be a great number.

On the local stock front the March quarter production results continue to roll in for resource companies. Of significant importance will be the interim profit result for Westpac ((WBC)) on Thursday.

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