Next Week At A Glance

This story features OZ MINERALS LIMITED. For more info SHARE ANALYSIS: OZL

By Greg Peel

Volatility has suddenly reappeared in the stock market, with the ASX 200's price action this week a case in point. Not that you'd know it from VIX volatility indices which remain below 20 in the supposed complacency zone. VIX indices do not measure historical (ie what just happened) volatility but implied volatility, being the volatility level implicit in the price the market is prepared to pay for option protection. At the moment, that price remains to the low side, suggesting there is no heightened level of fear in the market.

The commodity crunch experienced in the past several sessions sure looks like a reason to be fearful, but investors with more than short-term time horizons have greeted it with a shrug, or even with relief. The commodity trade became overcrowded with speculators, and every day prices didn't correct to more fundamental levels the potential size of the bust which must inevitably come grew larger. The bust has come over the last several days and some of the daily moves have been historically spectacular, but there is no perception that the world is about to end. Sometimes busts are healthy.

Not so healthy, nevertheless, for the ASX 200, which is obviously dominated by commodity-related stocks. Yet with commodity price falls has come at least a little Aussie dollar relief, so there is a dampener. The dust now needs to settle and commodity and currency prices re-base to more comfortable levels before we “start again”, meaning return to a more fundamental assessment of value.

Tonight in the US sees the release of the April CPI. Is there any sign of inflation at all in the free-money US economy? Tonight we also see the eurozone issue its first estimate of March quarter GDP.

Housing data dominate US economic releases next week, with the NAHB housing sentiment index, housing starts and existing homes sales all in the frame. An apparent slowing in US economic growth will be tested by the industrial production numbers along with the Empire State and Philly Fed manufacturing indices. The Fed will release the minutes of the last FOMC meeting on Wednesday and Wall Street will be looking for any further clues on policy, albeit Bernanke's historical press conference following the policy statement likely provided all one needs to know.

The minutes of this month's RBA meeting will be released on Tuesday and the magnifying glasses will be out. Rate rise in June? The market is split. One thing can be said though, and that's whenever economists get fired up and assume a rate rise is inevitable they are almost invariably wrong, at least in the timing.

The other highlights in Australia next week will be housing finance and the Westpac consumer confidence gauge, and the March quarter wage cost index. This is the first of a round of quarterly data that will flow over the next two weeks in the lead-up to the GDP result on June first. Get set for economists to jostle and rejig their estimates.

Japan will release its March quarter GDP this week which, for obvious reasons, will be a talking point. It was very late in the quarter when the tsunami struck, nevertheless.

On the local stock front there are more AGMs scheduled for next week than anyone would care to count, albeit large caps are almost unrepresented. OZ Minerals ((OZL)) is one exception. 

For a more comprehensive preview of next week's events, please refer to "The Monday Report", published each Monday morning. For all economic data release dates, ex-div dates and times and other relevant information, please refer to the FNArena Calendar.

Click to view our Glossary of Financial Terms