The Week Ahead: One Eye On Sydney, One On NY

This story features WESTPAC BANKING CORPORATION, and other companies. For more info SHARE ANALYSIS: WBC

(This story was originally published on Monday, 09 December 2008. It has now been republished to make it available to non-paying registered readers at FNArena).

By Andrew Nelson

Wall Street defied another trough in economic data on Friday. This saw stocks finish the day better than 3% higher and sets the stage for a positive beginning to the local investment week.  The focus will be on Reserve Bank of Australia governor Glenn Stevens’ speech on Tuesday and the Australian Bureau of Statistics labour force data for November due out on Thursday. If everything works out according to plan these data should show that Australia too is losing jobs (and thus the country will be in recession – NBER style).

There is little of note on the corporate calendar except for a few last companies looking to wedge their AGMs in before the holiday break. Companies holding annual general meetings this week include Westpac ((WBC)), Bank of Queensland ((BOQ)), BT Investment Management ((BTT)), Strathfield Group ((SRA)), Macquarie Countrywide Trust ((MCW)), Macquarie Office ((MOF)) and Oroton Group ((ORL)).

There’s a bit on in the region worth note, with Chinese consumer price index (CPI) and producer price index (PPI) releases for November. Together, the reads will give a good insight into the growth prospects and inflationary pressures at play in this increasingly important economy. Japan also has a big week on the cards, with GDP and the most recent consumer goods price index giving us a good look at the state of the Japanese economy.

But again the major driver will be the doing and transpirings in the US. Unfortunately, my crystal ball doesn’t have enough horsepower to figure out what’s going to happen there. Let’s use Friday as an example.  Wall Street surged on news of massive US job losses. Figures released in the US showed employers axed 533,000 jobs in November, the most since 1974. The market rallied better than 3%.

Makes sense? Of course it does. The data were so bad that investors couldn’t help but believe that more rescue and stimulus must be on the way. Plus they probably thought this is so bad, this has to be the bottom too.

So next week, economic data will take centre stage, with a spotlight on November retail figures and weekly jobless claims later in the week. Other economic indicators include the Michigan consumer sentiment index and the Producer Price Index reported by the Labor Department. Producer prices are typically volatile, but broad-based declines in commodity prices suggest significant weakness in the months ahead.

Few expect any sort of good news, but who needs it in the current climate? After Wall Street shrugged off Friday’s dismal employment report, some are starting to sense that investors are simply starting to dig in their heels and start insisting that around here is as good a place as any to declare a bottom.

Let’s hope this frame of mind carries into next week, otherwise more evidence of a struggling retail sector and a continuation of the run of downgraded corporate outlooks might end up having their normal effect.

The question of failing auto makers is another big wild card. Government could start debate on whether and how to rescue GM, Ford and Chrysler as early as Monday, but after having a good look at the press over the last week or so, even if a plan is announced, there are few who hold out any hope for its effectiveness.

In our region on Monday the big news will be the Q3 GDP read from Japan. GDP is expected to contract 0.2% quarter-over-quarter after the preliminary report showed a 0.1% decrease. There will also be current account data and the economy watcher survey. New Zealand sees November house prices and in Australia, there’s the November ANZ job ads series.

Tuesday starts with key data from the UK, including PPI and IP reads, while Europe gives us the results from the Sentix investor confidence survey. Japan puts out the leading and coincident indices for October. This release is bound to attract attention from investors trying to gauge the outlook for commodities demand out there.

Australia will be watching the speech from RBA Governor Glenn Stevens and looking at the results from the November NAB business survey. ANZ thinks a small bounce may occur, but will remain at low levels after falling to a record low in October.There are also a few AGMs on the calendar including Strathfield Group and Macquarie Countrywide Trust.

Wednesday starts with a flood of data from the northern hemisphere, including European economic sentiment, UK trade balance, retail sales, house prices and manufacturing production numbers. The US puts out pending home sales for October.

NZ terms of trade heads up the releases in our region, while Japanese market participants are waiting for the release of several data points, including the most recent consumer goods price index. CGPI is expected to show a 1.7% month-over-month decrease in November, along with a 2.8% year-over-year increase. While an important read, Monday’s final third-quarter GDP result will likely have more of an influence on markets, as well as the forward looking indicators the next day.

In Australia, the Westpac/Melbourne Institute consumer sentiment index for December and ABS housing finance data for October will be released on Wednesday. On the company front, Oroton Group ((ORL)) hosts its AGM.

Westpac expects the sentiment will be better than it could have been given the recent run of rate cuts and lower fuel prices. Meanwhile, ANZ expects the freefall in approvals to come to an end in response to lower rates and the boost to the first home buyers grant.

Thursday sees us look at the UK’s GDP estimate, while from the US there’s wholesale trade numbers and the US Treasury Statement for November. China releases its CPI data, New Zealand has business PMI and food prices.

In Australia we’ve got consumer inflation expectations for December, which should ease in line with falling petrol prices, but the latest Australian employment figures for November remain a highlight of the day; if not for the week. The country’s unemployment rate is expected to uptick to 4.4%, while the employment change is expected to post a decrease following an increase in October.
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ABB Grain ((ABB)) pays out a 14c dividend, while Bank of Queensland and Westpac host their AGMs.

On Friday we start with the US trade balance and jobless claims data, with NZ retail sales and Japanese consumer confidence reads following.  There’s nothing on the Australian economic calendar for the day and the corporate calendar only shows an AGM for Macquarie Office ((MOF)).

For more information please check the calendar on the site.

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