The Week Ahead: Pick A Card, Any Card

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By Andrew Nelson

The scene is set for what should at least be a positive start to the week, with a solid run on Wall Street Friday likely to runneth over to local trading as we start the week. The fact that president-elect Barrack Obama has pledged another stimulus package for the sick US economy won’t hurt either. The rest of the week sees a flood of data from the top half of the world and while there’s not much out in Australia, the few things there are on the calendar will be well worth watching.

One of the week’s key local reads will be the Q3 capital expenditure report. Business investment has been the key driver of the Australian economy during the years past and the last capex report out served as a well used crutch to demonstrate that Australia will do better than the rest of the developed world. While three months later this looks like it might well be the case, it’ll will be nice to know to what extent the confidence in investment intentions has faded in response to declining business confidence.

Other than that there’s just Q3 construction work done and October private sector credit before we’re off into the corporate calendar to looks for things to put in our local market diary. It will be another week of annual general meetings, with BHP Billiton ((BHP)), Harvey Norman ((HVN)) and David Jones ((DJS)) among those presenting to shareholders. David Jones is also due to release its first quarter sales results, while insurer Tower Australia Group ((TAL)) will release annual results.

Looking to the US and markets will be preparing for a short week of trading, with Wall Street closed on Thursday for the Thanksgiving holiday. Traders can expect little holiday cheer, however, with the fate of Citigroup now in question and November proving to be one of the worst months for stocks on record. After President elect Obama nominated New York Federal Reserve chief Timothy Geithner as his secretary of the treasury on Friday, at least there will be a little hope floating about in the market. And that’s something that’s been missing for a while now.

Key economic indicators out in the US next week include existing-home sales for October, consumer sentiment and confidence, and weekly US jobless claims data. But all eyes will be glued to the fortunes of Citigroup and any signs as to the future of the bank. On Friday, the bank’s board met to discuss the bank’s options, according to Reuters, which could include anything from asset sales to a merger with another institution.

Outlooks from major retailers at the beginning of the crucial holiday shopping season will also be closely watched and current trends suggest this could be one of the worst holiday shopping seasons in years.

Monday starts with very little on the domestic economic calendar, while Japanese corporate service price data for October are due out. In addition, the Reserve Bank of New Zealand will publish its two-year inflation expectations. Other than that there are six stocks trading ex-rights, there’s nothing on the corporate calendar. But it’s Monday, so while you can enjoy the slow kick-off to the week, don’t relax too much. (We’re going to start the week on a positive note, so there’s likely money to be made).

Tuesday begins with the Eurozone current account and new industrial orders for September. There’s only one release out in the US and that is existing home sales for October. Closer to home look out for the RBNZ’s 4Q inflation expectations and the Bank of Japan’s monthly report.

On the corporate front there’s interim profits from Campbell Brothers ((CPB)) and three AGMs, including Harvey Norman’s.

Wednesday starts with UK 3Q total business investment and a raft of releases from the US including 3Q GDP, house prices, November consumer confidence and the Richmond Fed’s manufacturing index for November. In Australia there are 3Q numbers for construction work done and skilled vacancies. Economists at CBA expect only a minor downturn, with the amount of work in progress and a significant amount of work in the pipeline projects expected to support engineering construction for some time to come.

It will be a big day on the corporate calendar, especially if you own shares in Telstra ((TLS)), as the government’s FTTN decision is expected. Telstra still hasn’t indicated whether it will compete for the project, or not. Programmed Maintenance ((PRG)) issues its interim results, David Jones publishes its 1Q sales and Babcock and Brown Wind ((BBW)) hosts its AGM. 

Thursday begins with another swag of releases from the US including October personal income, the PCE deflator, durable goods and new home sales and November PMI and consumer confidence reads. While all are important, even more so will be the 3Q GDP read from the UK and the answer to the big question: how big is your recession?

In our region, the Bank of Japan’s latest minutes will prove an interesting read, while trade and business confidence numbers from NZ will also be put out. Australia got a big 3Q capex read to contend with. Low levels of consumer confidence and weak consumer spending has been the name of the game since the last capex read, but so far at least, business capex has proved resilient to the drop in business confidence. Commonwealth Bank Chief Economist Michael Blythe thinks capex plans may prove surprisingly resilient and he expects real capital spending to rise by 1% in Q3, putting annual growth at 14%.

But this could be the last hurrah for big economics releases and if the resilience in capital spending soon subsides, Australia would lose on of the last key supports for economic activity, an outcome that would materially alter the growth outlook for 2009.

There are also four AGMs on the day, with BHP Billiton and Woolworths ((WOW)) being the clear standouts as to what the market will be looking at. Tower Australia puts out its full year figures.

Friday sees European consumer confidence and business climate reads, but nothing from the US as they will have spent Thursday dining on turkey and watching football and parades on the Thanksgiving holiday. Closer to home it’s a very busy day, with NZ building permits and Japanese CPI, IP, retail sales, housing starts and construction orders all slated for release.

Australia sees private sector credit numbers and HIA new home sales data. October’s credit data is expected to show a slight improvement again, but still remain at what are weak levels.There are also five AGMs to close out the week, including Centennial Coal ((CEY)), Qantas ((QAN)) and Beach Petroleum ((BPT)).

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