The Monday Report

This story features EXCITE TECHNOLOGY SERVICES LIMITED, and other companies. For more info SHARE ANALYSIS: EXT

By Rudi Filapek-Vandyck

Worst case scenarios are haunting global risk assets on the back of a volatile and fragile political situation in Egypt. The award for the headline of the weekend goes to the Wall Street Journal where someone came up with "Rebellion in the Land of the Pharaohs".

Markets had arguably become a little too exuberant and crisis in Egypt is as good as any other reason to take some profits off the table. Having said so, both crude oil and gold have now received a shot of adrenaline. Nothing that was in place when investors left their desks in Australia on Friday is still the same on Monday morning. SPI futures are signaling the local market is likely to join overseas peers and head lower at the opening today by close to 50 points.

What started as a sudden eruption of populist discontent in little Tunisia has now put the reign of President Hosni Mubarak in neighbouring Egypt under serious threat and Washington appears ready to accept regime change, with uncertain consequences for the region. Financial markets don't like uncertainty.

Global risk appetite was already on the decline leading up to Friday's events, it is likely to take a few more steps back, at least initially. On Friday, the DJIA lost 1.4% to close at 11824, the S&P 500 lost 1.8% to 1276, and the Nasdaq fell 2.5% to 2687.

Egypt will remain the focus of global markets until the rebellion is dealt with, one way or another. In the meantime, the calendar looks chock-a-block with plenty events that investors can ignore in the meantime.

Monday in Australia starts with more December quarter production reports from the likes of Avoca ((AVO)), Cockatoo Coal ((COK)) and Australian Worldwide ((AWE)). There are AGMs from the likes of Extract Resources ((EXT)) and GBM Resources ((GBZ)) and the calendar also promises interim results from Crane ((CRG)) and a trading update from Origin ((ORG)) and Wesfarmers ((WES)). On the economic front we have the unofficial inflation read by TD Securities and an update on business credit.

Later in the US we will have the Chicago PMI, as a warm up to the "real" PMI release the next day, and an insight into personal income and expenditure.

On Tuesday we have more company releases in Australia with the likes of Woolworths ((WOW)) and Bunnings Warehouse ((BWP)) on the calendar, but above all this week's Tuesday is global manufacturing day and investors will have plenty of PMI reports to digest, including Australia, but more importantly, including China and the US. Tuesday also offers the RBA's latest decision on interest rates (no change) plus a NAB survey into local business conditions and sentiment.

Wednesday sees more of the same in terms of corporate releases in Australia with AXA Asia-Pacific ((AXA)) and Graincorp ((GNC)) on the calendar while the US will bring us an update on private sector jobs creation (ADP report). This will provide markets with a hint about what Friday's all-important jobs report might deliver.

Thursday looks pretty full with News Corp ((NWS)) and Myer ((MYR)) on the calendar, among others, while the US will see the releases of chain store sales, factory orders and services PMI. The ECB will announce its own decision on interest rates and in Australia we'll have building approvals and the December Trade Balance first.

Friday gives us inflation in Europe, but above all the January jobs report in the US.

Last Friday, the initial Q4 GDP estimate in the US was largely ignored as street protests and violence in Egypt demanded everyone's attention. It seems rather unlikely that financial markets will equally ignore this Friday's jobs report. An improving US economy is key in sustaining investor optimism into 2011 and an improving labour market is a key part of this.

AUD/USD opens this morning at at .9895. AUD/EUR opens at .7287; AUD/GBP opens at .6252, AUD/NZD opens at 1.2853 and AUD/JPY opens at 81.16.

EUR/USD opens at 1.3585.

China will celebrate its own New Year this week.

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

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