The Monday Report

This story features BENDIGO & ADELAIDE BANK LIMITED, and other companies. For more info SHARE ANALYSIS: BEN

By Greg Peel

Economists had been hoping that Friday's US jobs report would show a net loss of 55,000 jobs but a private sector gain of 100,000 jobs. The balance would be made up of temporary census worker job losses. But the net figure came out at 131,000 jobs lost and only 71,000 private sector jobs added.

The result was yet another kick in the teeth for the optimists. There were indeed jobs added, and the unemployment rate remained steady at 9.5% when a tick up to 9.6% was expected, but temporary census workers are consumers too and the unemployment rate depends on how many people either join or leave job-seeking registration.

There was more bad news in the form of monthly consumer credit, which fell 0.7%. This implies Americans are keeping the plastic in the wallet.

The news had the Dow down 160 points on the open, but the tumble was short-lived. If Wall Street wasn't already confident prior to the jobs report, it is now convinced that the Fed will announce a recommencement of quantitative easing measures in its monetary policy statement on Tuesday. The US economic recovery from the GFC is flagging, and clearly the economy is as yet unable to stand on its own two feet without further stimulus. It is quite possible the Obama Administration will also respond with fresh fiscal stimulus, with the tip being a deferral of the expiry of the Bush tax cuts. Home buyer tax credits may also again be on the list.

Despite the dire situation, Wall Street likes having the Fed on board. Thus the Dow spent the rest of the session recovering lost ground to close down only 21 points, or 0.2%. The S&P 500 lost 0.4% to 1121.

The Fed is not prepared to live with deflation, and a reinstatement of QE means the printing presses will be turned back on. Such a move sparks fears of monetary inflation down the track, which is why gold reclaimed the US$1200 mark on Friday by rising US$10.80 to US$1205.70/oz. The dollar index fell 0.5% to 80.38, and the Aussie ticked up to US$0.9184.

Monetary inflation should also imply longer-dated US bonds are less valuable, but investors are currently preferring safe bond yields despite low rates in preference to a stock market beholden to a weakening economy. Having spent the last couple of weeks trying to get back over the 3% mark, the benchmark US ten-year yield fell back 8 basis points to 2.82% on Friday.

Oil responded to the jobs data with a US$1.38 fall to US$80.70/bbl, while base metals were more resilient. Copper was steady but nickel, tin and zinc all gained 1%.

Metals have been having a strong run recently on a combination of speculation and tight short term supply, but if the US dollar now begins a steady decline once more in the face of stimulus measures the risk is base metals go for an inflationary run up without fundamental demand support.

The SPI Overnight fell 14 points or 0.3% on Friday night.

So it will be all eyes on the Fed's monetary statement due on Tuesday night. With no data due for release tonight, we could be in for a typically quiet summer session.

Along with the Fed decision, Tuesday will see second quarter productivity and wholesale inventories and sales. Wednesday it's the trade balance and Treasury monthly budget, while it will be a busy Friday with retail sales, the CPI, business inventories and the first Michigan Uni consumer confidence survey for August.

On the subject of bonds, the Treasury will auction another US$74bn of paper this week, across three-years, ten-years and thirty-years. Just how keen will be foreign interest?

Across the globe there will be much information on industrial production this week, with all of Japan, China, the UK and eurozone reporting. China releases its trade balance tomorrow and then Wednesday brings the latest round of monthly data, including PPI, CPI, retail sales and fixed investment, along with IP. On Friday the eurozone will release its first estimate of second quarter GDP.

It's independent data week in Australia, with today bringing the ANZ jobs ads series, Tuesday the NAB business confidence survey, Wednesday the Westpac consumer confidence survey and Thursday the Westpac consumer inflation expectations numbers. Amongst those numbers we have home loan and investment lending data out today, and the unemployment report due on Thursday.

The quarterly earnings season in the US is beginning to wind down but the Australian six-monthly season is beginning to hot up.

The real deluge begins next week but this week sees Bendigo & Adelaide Bank ((BEN)) today along with JB Hi-Fi ((JBH)) and Healthscope ((HSP)). Tomorrow the highlights include Alumina Ltd ((AWC)) and Cochlear ((COH)) and National Bank ((NAB)) will provide a quarterly update.

Wednesday brings the CommBank ((CBA)) full-year, and a chocka Thursday sees results from Austereo ((AUN)), Coca-Cola Amatil ((CCL)), James Hardie ((JHX)), Qantas ((QAN)), Transurban ((TCL)) and Telstra ((TLS)), to name a few.

For further global economic release dates and local company events please refer to the FNArena Calendar.

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