Tag Archives: China and Emerging Markets

article 3 months old

The Overnight Report: Counting The Days

By Greg Peel

The Dow closed up 76 points or 0.5% while the S&P gained 0.5% to 1952 and the Nasdaq added 0.8%.

Back in your box

This week we have seen the ASX200 dip below 5000 on the open on Monday morning following weakness on Wall Street, but recover to close above that mark for the third time since the correction. This suggested 5000 is a floor, and it was thus no surprise the index took off on Tuesday.

But Tuesday also featured Woodside’s takeover bid for Oil Search, thus prompting outperformance for the energy sector. Meanwhile, investors decided that at these levels, the beaten-down banks looked attractive, particularly on a yield basis.

Having rallied over 2% on Tuesday, the banks rallied again by over 3% on Wednesday. The financials sector was far and away the major driver of the ASX200’s recovery to 5200. Then yesterday, the wheels fell off.

The biggest loss yesterday was reserved for the energy sector – the sector which had stuck its neck out a bit far earlier in the week. It fell 3.8%. Sure, the oil price fell again overnight, but while WTI has been to-ing and fro-ing of late with heightened volatility, it has really only oscillated around the mid-forty level without going anywhere much. Analysts do not expect Woodside’s bid to succeed but that matters not. Energy sector M&A has been anticipated for some time and the Genie is now out of the bottle.

Outside of energy, every sector copped a beating yesterday of 1.5 to 3% (excluding insignificant info tech). The banks lost 2.7%, but then the telco lost 3.0%. Materials fell 2.1% despite another tick-up in the ore price and stability in base metal prices. Yesterday was thus an index-selling day, rather than a sector-specific attack. The selling is thus not yet over, and it is likely the two dark clouds of China slowdown and Fed rate decision are ensuring enough fund managers are still not convinced the story has played out yet.

The good news is that yesterday took us back to just below 5100, and not all the way back down to 5000. While sell-on-close orders forced a late dip, the low of the day was actually just before midday, so we did not close on the low. If the index holds its ground today (SPI Overnight up 21 points), and being a Friday we should see less volatility, then we will have established a higher low. A positive sign, for now.

The Fed remains the swing factor. But one thing to remember is that the bottom of a correction is never immediately apparent at the time. More realistically, investors wake up one day to realise that the dust has settled and the market is actually moving up again.

Data

The ASX200 bottomed yesterday on the release of the local August jobs data. While the unemployment rate fell to 6.2% from 6.3% in July as expected, the actual jobs added figure was greater than expected. The jobs market is holding pretty steady for the time being.

The result sparked a big surge in the Aussie – unsurprising given everyone’s short. Market volatility and the China slowdown have recently heightened the possibility of another RBA rate hike, and this week’s RBNZ rate cut only served to further fuel that fire, but RBA rhetoric is suggesting nothing of the sort. The Aussie spiked on the release and kicked on overnight on a weaker greenback to be up 1.2% at US$0.7076 this morning.

Alongside the local jobs numbers yesterday we saw China’s August inflation data. The good news is China’s headline CPI jumped up to 2.0% annual growth from 1.6% in July. The bad news is most of that jump was due to a surge in volatile pork prices. Beijing does not publish a core (ex food & energy) inflation number so economists have to make their own calculations.

The other bad news is that the headline PPI fell for the 42nd consecutive month to be down 5.9% annually. That’s a drop from July’s 5.6% and the worst reading since September 2009’s minus 7% at the time commodity prices were crashing. The good news is this number will only encourage Beijing to steel its stimulus resolve.

Wall Street

Markets were weak across the Asian time zone yesterday and that weakness carried into Europe and the UK. But whereas this might typically prompt early weakness on Wall Street, instead the US stock indices rallied in the morning. The impetus for the rally was yet another volatile session for the oil price, which jumped 4%.

By 2pm the Dow was up around 190 points but that’s when the Nymex closed and oil trading went electronic. The WTI price drifted back a little, and so did US stocks, almost back to square. Late buying saved the day.

Fed, Fed, Fed – that’s all anyone can talk about. Until the September meeting is concluded next Wednesday night, we can’t expect any great market move beyond ongoing intraday volatility. Last night Goldman Sachs put out a note reiterating its call that the Fed will not raise in September, but in December. We might call this simply one view among many, except for the disturbing relationship Goldman has with the US Treasury and the Fed.

Last night the US ten-year bond yield rose 4 basis points to 2.20%.

Commodities

Latest prices have West Texas crude up US$1.60 or 3.6% at US$45.73/bbl. Brent is up US$1.27 or 2.7% at US$48.77/bbl.

Base metal trading was again subdued last night except for nickel and tin. Nickel decided to jump 4% and tin 2%.

Iron ore jumped US$1.60 to US$58.50/t.

The US dollar index fell 0.4% to 95.54 allowing gold to claw back US$4.90 to US$1110.30/oz.

Today

As noted, the SPI Overnight closed up 21 points or 0.4%.

It would not be surprising to see another very “Friday” session today, in which the week’s volatility wanes and no one wants to get excited either way ahead of the weekend.

On Sunday Beijing will release August industrial production, retail sales and fixed asset investment numbers.
 

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All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

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article 3 months old

The Overnight Report: What Goes Up

By Greg Peel

The Dow closed down 239 points or 1.5% while the S&P lost 1.4% to 1942 and the Nasdaq fell 1.2%.

Rising Sun

The Japanese stock market rose 7.7% yesterday. To put that into perspective, had the ASX200 rallied 7.7% yesterday we would have been back over 5500.

Commentary puts the Japanese surge down to a reaffirmation from Shinzo Abe that he still intends to deliver on his promise of a cut to corporate tax rates alongside maintaining significant monetary stimulus in order to revive the Japanese economy. He did not actually say anything new, and given the success of Abenomics has been clearly lacking to date, no doubt reaffirmation was a political move rather than a pragmatic one.

Abe nevertheless chose to speak at a convenient time, when the world had suddenly become excited about speculation Beijing is set to introduce another round of fiscal stimulus measures to support recent monetary measures. Although, as to whether stimulus speculation is the cause of recent global stock market strength, or just the excuse, is debatable.

More likely the bulk of the big rallies around the globe can be put down to investors suddenly deciding they’d better get in, on the assumption the bottom has now been established, lest the bargains they’d been waiting for quickly become bargains no more.

I tender as evidence, Your Honour, Australian banks.

Banking on it

I noted yesterday the local financials sector jumped 2.2% on Tuesday to provide the biggest points contribution to an index gain otherwise supported by energy, following the big merger offer. Yet banks have little connection to oil & gas, and realistically any connection to Chinese fiscal stimulus is also circuitous.

But yesterday the financials jumped another 3.1%. Daylight came in second, followed by the telco on 2.0%, with the resource sectors managing only around 1.5% each (albeit BHP went ex). The vast bulk of the hundred point rally for the ASX200 was attributable to the Big Four.

I suggest we’re probably seeing a kick-on in momentum from Westpac’s ((WBC)) strategy day on Monday, at which the bank announced some aspirational targets (too aspirational as far as most analysts are concerned) and did not announce a capital raising, as have its three peers. Given the banks were amongst the most heavily sold down in the correction, on a combination of the global macro story and the micro story of increased capital requirements, it stands to reason the banks should lead the rebound from “oversold” territory.

Let’s face it, investors found Australian bank yields very attractive at much higher share prices. They’re that much more attractive now, and no one wants to miss out.

As an aside, the value of Australian housing finance rose by 1.5% in July but the annual rate of growth slowed slightly to 15.0%. The value of loans to owner-occupiers rose 2.2% for a 14% annual growth rate. The number of loans approved over the past twelve months has only actually grown by 3.9%. The difference in number and value is a reflection of surging house prices, and the greater capacity of borrowers due to low interest rates.

Investor loans rose 0.5%, slowing annual growth to 16.5%. Lending to investors is quietly cooling, no doubt due to tighter capital requirements implemented by APRA but also due to the fact rental yields are now falling behind house values, making property investment less attractive.

Westpac’s index of consumer confidence fell 5.6% this month to a pessimistic 93.9. But Bridge Street was unfazed, as was the case with Tuesday’s similar NAB business confidence result, given the survey was conducted at the height of recent global market volatility.

Indeed, the consumer discretionary sector rose 1.6% yesterday. On any other day, such a weak confidence result would have garnered a diametrically opposite response.

So the market has been sold down on fear and over the past couple of days has rallied on fear – fear of missing out. It is not unusual at such times for markets to swing wildly between oversold and short-term overbought as a consolidation process following significant volatility.

And speaking of volatility…the SPI Overnight closed down 82 points.

Mood Change

For the best part of 2015 to date, Wall Street has traded on an underlying adverse economic theme that good news is bad news because good news means the Fed will raise sooner rather than later. Having not had a correction for four years, up until recently, the obvious trigger would be the day the Fed announced its hike, many a commentator suggested.

Well here we are, one week from a highly possible Fed lift-off, and the mood on Wall Street has largely swung around the other way. If fear of a Fed rate rise dominated earlier in the year, the fear now is that next week the Fed won’t hike. The cloud hanging over Wall Street at present is not what damage a rate hike might cause, but what damage ongoing monetary policy uncertainty might engender.

Indeed, commentators warning that the US stock market really needs to go back down to test recent lows before it can truly rise again are suggesting a trigger for a second leg down would be no rate rise and further non-committed waffle from an indecisive central bank. It would suggest either the Fed fears the US economy is not in as robust a position as has been assumed (June quarter GDP up 3.7%, unemployment 5.1%), or that the FOMC really has no idea what it’s doing.

And so it was that the Dow opened up over 200 points last night, riding a global wave that saw Australia up 2%, China up over 2%, Hong Kong up 4%, Japan up almost 8%, France up 1.4% and the UK up 1.4%. Germany had been up there too, but faded away at the close.

Arguably, yesterday’s rallies began on Wall Street on Tuesday night when the Dow jumped nearly 400 points. So it would have been double-counting for Wall Street to go again, rebound euphoria had created a short-term overbought situation, and it was time to take profits and apply caution ahead of next week’s Fed meeting.

And oil dropped 3.5% again, which is never a positive driver for the major indices.

Commodities

West Texas fell US$1.60 to US$44.13/bbl and Brent fell US$1.88 to US$47.50/bbl.

Base metals were nevertheless quiet, for once. All moves were negligible bar lead, which rose 1.4%.

Iron ore rose US50c to US$56.90/t.

It looks like gold traders have decided a September rate rise is booked in. The US dollar index is barely changed at 95.95 but gold has fallen US$15.80 to US$1105.40/oz.

The Aussie traded right up to 70.5 yesterday on short-covering as the local stock market surged, but has since been sold down again to be down 0.4% over 24 hours at US$0.6991.

Today

The SPI Overnight, as noted, closed down 82 points or 1.6%.

Australia’s August jobs lottery will be held today, while Beijing will release Chinese inflation data.

Sigma Pharmaceutical ((SPI)) will release its interim profit result today amidst another handful of stocks going ex-div.

Rudi will make his weekly appearance on Sky Business's Lunch Money at noon and appear again on Switzer TV between 7-8pm.
 

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All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

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article 3 months old

The Overnight Report: All Is Forgiven

By Greg Peel

The Dow rose 390 points or 2.4% while the S&P gained 2.5% to 1969 and the Nasdaq jumped 2.7%.

W-Bounce

“The next words you will hear with regard material and energy sector stocks around the globe will be ‘consolidation’ and ‘rationalisation’”.

- Overnight Report, August 25

The ASX200 jumped 70 points from the opening bell yesterday. Having failed to close under 5000 three times in a row, the index was always a good chance to see renewed strength in buying on its own, but a little bit of help from the energy sector also provided for a more positive mood.

Yesterday Woodside Petroleum ((WPL)) made a takeover offer for Oil Search ((OSH)), sending Oil Search shares up 17%. The move is seen as opportunistic – exploiting the fall in oil prices and thus energy sector share prices – and Oil Search may well reject it, but Oil Search shares jumped 17% yesterday and the bid floated all boats in the sector.

Woodside shares fell 3%, which is typical for the predator company in a takeover, but the third member of the LNG Big Three – Santos – jumped 5% and some of the smaller players, such as Beach and Senex, enjoyed 3% gains. The energy sector as a whole closed up 2.7%.

There is no connection between global LNG exporters and domestic banks, but the financials sector jumped 2.2% yesterday to add the most number of sector points to the index rally. This buying represents more general buying of beaten-down large caps in anticipation that the three failures under 5000 represents the beginning of a typical W-bounce for the Australian stock market.

The utilities sector definitely is connected to the energy sector, via pipelines, and it was the second best performer yesterday with a 2.3% gain. Materials rallied 1.8% thanks to a jump in the iron ore price, and all other sectors posted lesser moves into the green.

It was never going to matter what NAB’s business confidence survey revealed yesterday.

As it was, NAB’s survey looked pretty bleak at face value but was actually quite positive behind the scenes. Business confidence dropped 3 points to plus 1, to be well below the long run average of plus 5. But given the survey was taken two weeks ago, at the height of global market volatility, the result has been quickly dismissed as being reactionary.

On the other hand business conditions – the “now” – rose 5 points to plus 11 compared to a plus 1 average. The increase has been attributed to the falling Aussie dollar finally beginning to have an impact on the economy.

Again, the survey could have been much worse and the Australian stock market would not have much cared yesterday. Nor was there much angst evidently created by another weak set of Chinese data. The ASX200 dipped a little after the release, but kicked on strongly to the close.

Let’s Get Stimulated

I suggested last week that this week’s raft of Chinese data releases were unlikely to set off another round of selling, given the market is ready for them to be bad anyway. And yesterday’s August trade numbers were certainly bad.

Exports fell 6.1% year on year, having been down 8.9% in July. This was not only in line with expectations, but an improvement of sorts. But the shock came in imports, which fell a much greater than expected 14.3% having been down 8.6% in July.

Moreover, Beijing quotes its figures in US dollars, converted from renminbi. Last month the PBoC devalued the renminbi, and the new exchange rate was used for yesterday’s conversion. Given half the month represented trade at the old exchange rate, the numbers are a little misleading. At the old exchange rate, exports fell 10% and imports fell 17%.

The Australian stock market may have retreated yesterday afternoon if the Chinese stock market fell out of bed on the trade numbers, but it didn’t. Having been down 2% after lunch, the Shanghai index turned and rallied 5% to close up 3%.

While this might be explained by the PBoC kindly declaring on the weekend that the stock market rout was near to an end, it has been attributed to assumptions Beijing will consider even more stimulus measures, beyond the interest rate and RRR cuts and currency devaluation we’ve seen to date. One might also realistically consider that the data are yet to reflect any impact from the devaluation, notwithstanding interest rate cut impact has a lag-time in effectiveness as well.

Back to Business

I have suggested in this Report time and time again that the “smart money” on Wall Street stands aside on days of important economic releases, such as Fed statements and jobs numbers, and lets the headless chooks run around in panic. The smart money then makes its move the following trading day after more thoughtful consideration.

Friday on Wall Street saw a big drop, which was attributed to a 5.1% unemployment rate making a September Fed rate rise more likely. But we must also consider that it was a Friday before the long weekend that heralds the end of summer, and that most of the market disappeared at lunchtime. The afternoon session was then conducted among the tumbleweeds and trading was thin.

I have also suggested for a while now Wall Street is quite ready for a September rate rise, and indeed would just like to get it over and done with. Thus I also believe that while last night’s rally on Wall Street was attributed by commentators to a strong finish in Shanghai on hopes of further Chinese stimulus, it was more a case of the smart money deciding Friday’s drop was unnecessary and with global volatility easing, it’s a good time to buy.

September rate rise? Bring it on!

It is also interesting to note the Dow closed last night above the level at which it closed prior to the thousand point opening fall on August 21, which set off the aforementioned bout of heightened global volatility. And it is possibly more interesting to note the US ten-year bond yield jumped 7 basis points to 2.19%

There is some concern that the US indices did not go back down to retest the lows after the first drop, and hence may yet have to do so before the bull market can resume, it is suggested. In other words, we need another leg down before we can actually go up. Maybe a September rate rise could prompt this, but that would be to assume (a) Wall Street is terrified of a rate rise, which it appears not to be, and (b), stock markets follow rules.

Commodities

The “bad news is good news” theme out of China, meaning expectations of further stimulus, set off short-covering rallies on the LME last night. Base metal prices were weak on Friday night in the absence of US traders, and so short-covering was always going to spark sharp rallies.

Copper led the field with a 4% gain, while nickel and zinc rose 3% and aluminium rose 2%.

Iron ore rose US40c to US$56.40/t.

Oil traders are getting a bit giddy, and last night saw 3% jumps. West Texas rose US$1.29 to US$45.73/bbl and Brent rose US$1.59 to US$49.38/bbl.

The US dollar index fell 0.3% to 95.87, helped by some more positive trade data out of Germany supporting the euro. Gold was a little higher at US$1121.20/oz.

Aussie traders had set themselves very, very short, so a bounce in commodity prices was always going to be a sufficient trigger for an inevitable snap-back rally. The Aussie is up 1.3% to US$0.7017.

Today

The SPI Overnight closed up 45 points or 0.9%.

Today brings the Westpac consumer confidence survey, which will probably suffer the same fate as the business survey on the basis of timing. Housing finance data are also due.

Boral ((BLD)) will hold an investor day today, and there are a lot of stocks going ex-div, including BHP Billiton ((BHP)) and Woolworths ((WOW)).

Rudi shall make his weekly appearance on Sky Business's Market Moves, 5.30-6pm.
 

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available in the FNArena Cockpit.  Click here. (Subscribers can access prices in the Cockpit.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's - see disclaimer on the website)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

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article 3 months old

The Overnight Report: Third Time’s A Charm

By Greg Peel

US markets were closed last night.

Technically Positive

Yesterday’s Australian data included the August construction PMI, which jumped to 53.8 from 47.1 in July, mostly thanks to the apartment boom overcoming the ongoing decline in resource sector development.

We also saw the ANZ job ads series for August, which saw a 1.0% increase following a 0.5% drop in July. Ads are growing at an annual rate of 0.4%, but they were growing at 1.0% earlier in the year. The early pace was fuelled, ANZ suggests, by strong growth in service industry employment leading an accelerating pace of mining/energy job losses. The latter will catch up to the former, such that ANZ expects the pace of ad growth to continue slowing from here.

But local economic data are not the focus of the market’s attention right now.

The ASX200 was down 57 points from the opening bell yesterday, presumably reflecting a sizeable drop on Wall Street which, supposedly, was all about a 5.1% US unemployment rate providing a green light to the Fed to raise its funds rate next week.

The plunge took us down through 5000 to 4973 before the index steadied, consolidated, and then rose back to the 5000 mark by 11.30am. Thereafter, the buyers battled it out with the sellers for the rest of the session before the buyers ultimately prevailed. We still finished down 10 points, but at 5030, we importantly finished comfortably above 5000.

Last month’s intraday low point in the correction from 6000 was 4928, before a bounce to above 5300, and the second wave took us to 4995 last Friday before a bounce to 5040. Yesterday we saw 4973 before 5030, to mark a third failed attempt at breaching 5000 and closing below that level. Three failed attempts at a break-down is technically a rather positive sign.

Below 5000 it appears investors are confident in buying big, reliable names that have been caught in the downdraught of recent China and Fed-related selling through no real fault of their own. If we take out the performances of the energy (-1.3%) and materials (-0.7%) sectors yesterday the ASX200 would have finished in the green, and let’s face it, it is difficult to accuse some of the bigger names in those sectors of being reliable anymore. Or for that matter, quite that big.

Investors looking for value in safer names are clearly not concerned that today we will see China’s August trade numbers, and over the week inflation, retail sales, industrial production and fixed asset numbers. Indeed, the only surprise that could arise from the releases is if they are not too bad. Nor are the bargain hunters apparently concerned about Fed policy. In the wider scheme of things, the Fed is going to raise either next week or soon, and everybody knows that.

Chinese Checkers

Perhaps the buyers took some heart in the announcement over the weekend from the head of the PBoC that “the correction in the [Chinese] stock market is almost done”. Shucks, and there I was thinking stock markets are unpredictable. Perhaps the call was due to the government’s latest stock market-manipulating move, which sees tax exemptions for those holding onto their shares for more than one year.

But yesterday we also had Beijing admitting China’s 2014 GDP growth rate was only 7.3% and not 7.4% as first estimated. It’s interesting that Beijing can issue a quarterly GDP number only two weeks after quarter-close but it takes nine months to make a revision.

A drop to 7.3% from 7.4% is not exactly substantial, and has managed to shock no one. The more prescient issue is that the revision only serves to underscore a belief Beijing’s 7.0% target for 2015 might be looking a bit Disneyland at this point, but then just about every foreign economist set a forecast in the sixes at the beginning of the year. Beijing has assured us, of course, that China is still on track for 7.0%. It was also on track to meet the government’s 7.5% goal last year.

Commodities

When Wall Street is closed, every other market goes quiet. The European stock markets, for example, were up a bit last night having tanked on Friday night.

Nickel was the only metal to post a move of more than 1% on the LME last night, indeed falling closer to 2%, while the scorecard on the sub-1% moves was copper, lead up, aluminium, tin, zinc down.

Iron ore jumped US$1.00 to US$56.00/t.

Selling pressure hit Brent crude, which fell US$1.79 or 3.6% to US$47.79/bbl, and subsequently dragged down West Texas in electronic trade by US$1.27 or 2.8% to US$44.44/bbl. Traders suggested very thin volumes exacerbated the moves.

With the US dollar index little changed at 96.15, gold fell US$3.90 to US$1118.90/oz.

The Aussie had a brief look at 68 yesterday before trading up 0.2% over 24 hours to US$0.6924.

Today

The SPI Overnight closed down 3 points.

Locally, NAB will release its monthly business survey today.

China will release August trade data.

Japan and the eurozone will both revise their June quarter GDP estimates.

There’s another decent-sized group of local stocks going ex-div today, including Cochlear ((COH)).
 

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available in the FNArena Cockpit.  Click here. (Subscribers can access prices in the Cockpit.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's - see disclaimer on the website)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

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article 3 months old

The Monday Report

By Greg Peel

To recap on the correction so far, the initial drop took the ASX200 down to 5001 which marked the first bottom on a closing price basis. The next day it traded down to 4928 intraday, but closed at 5137. On the rebound, the closing price peak was 5263 (5303 intra) before the second wave of selling last week took us back down to 5027 on Thursday (4995 intra).

Friday was a nothing day, in which the ASX200 bungled along the flatline going nowhere much before closing up 12 points at 5040. It was very “Friday”, after another week of volatility and ahead of both the US jobs number on Friday night and the US holiday tonight.

We may conclude that the 5000 level, which offered impenetrable resistance from 2009 to 2013, is now the solid base of support. A close below that level would likely suggest more downside. The story would be different, nonetheless, were 5000 to hold right through the difficult month of September, which this week includes a raft of August Chinese data, next week the Fed meeting, and maybe by month’s end a Greek election.

No Clear Signal

Wall Street was nervous before the opening bell on Friday night, having seen selling pressure impacting on the Japanese stock market on Friday, which fell 2.2%, rolling into pressure in Europe, resulting in falls of 2.8% in France, 2.7% in Germany and 2.4% in the UK. It was all going to come down to the non-farm payrolls report.

Wall Street had expected 220,000 jobs, so the 173,000 result was a clear miss. However, this number alone does not tell the full tale.

Firstly, it had been widely discussed prior to Friday night that the first August number almost always comes in low, before subsequently being revised higher. It’s all to do with August being the summer shut-down month, similar to January in Australia. Thus the market was ready for a weak initial reading.

As it was, the August result included upward revisions to the July and June numbers, such that 173,000 still provided for a three-month rolling average of 200,000 plus. Then there’s the unemployment rate, which fell to 5.1% from 5.3% in July. The Fed has stated that it considers “full” employment to be 5.0-5.2%. Thus as far as the Fed is concerned, employment is now full, for the first time since April 2008.

For the past year there has been concern that while the unemployment rate has been falling, it has not been accompanied by wage growth, which supports inflation. August wage growth came in at 0.3%, beating 0.2% expectations. At 2.2%, year on year wage growth is the strongest it’s been in four years.

So overall, was it a “good” jobs report or a “bad” jobs report? It rather depends on who you ask.

The US stock market said “good” because the unemployment rate has fallen into the Fed’s target zone. That suggests lift-off at next week’s Fed meeting, and for the stock market, that’s taken as “bad”. The Dow fell on the open, traded to down 350 points around 2.30pm, rebounded to be down 200 points at 3.30pm and closed down 270. But if the jobs numbers were a clear green light to the Fed, we would expect to see both the US dollar and US bond rates rise.

The US dollar index fell 0.2% to 96.22 and the US ten-year bond yield fell four basis points to 2.14%. We recall that at the height of Fed rate rise speculation this year, the dollar index has been at 100 and the ten-year has been at 2.50%.

Meanwhile, commodity prices all fell, suggesting commodity traders believe it’s a green light for the Fed and thus the US dollar will have to rise.

So what are we to make of it all? Economists are largely split down the middle on September or December, with some outliers suggesting next year. Some suggest the Fed cannot raise when the markets are volatile, others say it is not the Fed’s mandate to placate the stock market. Some say the Fed cannot raise due to the threat of an accelerated Asian currency crisis, others say the rest of the world is not the Fed’s responsibility.

Many, like myself, simply say please get it over and done with. I continue to believe this is the way the Fed is feeling too.

Commodities

LME traders clearly took the US jobs report as ominous in Fed rate rise terms, given nickel fell 0.5%, aluminium, tin and zinc fell 1% and copper and lead fell over 2%.

Iron ore fell US80c to US$55.00/t.

West Texas crude fell US94c to US$45.71/bbl and Brent fell US97c to US$49.58/bbl.

Typically, gold takes a while to react, and hence Friday night gave us little indication of interest rate views given gold fell US$2.10 to US$1122.80/oz.

What is the Aussie telling us? I suggested on Friday morning that 70 appeared to be a line in the sand for now, but that idea was quickly kyboshed. On the break of 70, the Aussie fell sharply and is down 1.5% at US$0.6911. We haven’t seen the Aussie in the sixties since 2009. But are we seeing Fed speculation or ongoing Chinese slowdown fears? There is a raft of Chinese data releases due this week.

One thing’s for sure – the forex market is very short Aussie at present, hence sharp rebounds are on the cards.

The Week Ahead

The SPI Overnight closed down 28 points or 0.6% on Saturday morning which, if accurate, would take the ASX200 back down towards the 5000 level again today.

Tomorrow Beijing will release China’s August trade data. On Thursday the inflation numbers are due, and the weekend sees industrial production, retail sales and fixed asset investment. Chinese markets reopen today after two days off last week.

Wall Street is closed tonight for Labor Day, before consumer credit data tomorrow night, wholesale trade on Thursday and the PPI and fortnightly consumer sentiment on Friday.

The RBNZ and Bank of England will both hold policy meetings on Thursday.

In Australia, we see the construction PMI and ANZ job ads today, NAB business confidence tomorrow, and housing finance and the Westpac consumer confidence on Wednesday. Thursday brings our own August jobs numbers.

Quite a lot of stocks go ex-div this week, including CSL ((CSL)) and Insurance Australia Group ((IAG)) today.

Westpac ((WBC)) will hold a strategy meeting today and Boral ((BLD)) will host an investor day on Wednesday. Sigma Pharmaceuticals ((SIP)) will release its interim result on Thursday.

Rudi will appear on Sky Business on Wednesday at 5.30pm and on Thursday at noon and again between 7-8pm for the Switzer Report.
 

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

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article 3 months old

Next Week At A Glance

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.


By Greg Peel

US jobs numbers tonight. While one can usually toss a coin on whether monthly results are going to be good or bad, another coin can then be tossed on which way Wall Street will react to the result. The market seems to think tonight's jobs number will either mean a September rate rise or not, but would the Fed really be as flippant as to leave that decision all down to one number, with two weeks to go?

The US will thereafter enjoy the Labor Day long weekend which signals the end of summer holiday period. Look for volatility in a thin market tonight, and more considered approach on Tuesday night.

Next week the US will see consumer credit, trade and consumer sentiment numbers and the PPI.

China will release trade numbers on Tuesday and inflation numbers on Wednesday. Be very afraid.

Next week in Australia brings ANZ job ads, NAB business confidence and Westpac consumer confidence ahead of our own jobs numbers on Thursday. A good unemployment result will be all down to Joe Hockey's exceptional economic management skills, and a bad number will be Labor's fault.

Westpac ((WBC)) and Boral ((BLD)) will both hold investor/strategy days next week while Sigma Pharmaceuticals ((SIP)) will release its interim earnings report.

Quite a number of stocks will go ex-div next week.
 

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article 3 months old

The Overnight Report: Second Wave Breaks

By Greg Peel

The Dow closed down 469 points or 2.8% while the S&P lost 3.0% to 1913 and the Nasdaq fell 2.9%.

Playing to Script

These are the August purchasing managers’ index (PMI) numbers out of China yesterday:

Beijing’s official manufacturing PMI fell to 49.7 from 50.0 in July, and official service sector PMI fell to 53.4 from 53.9.

Caixin’s independent manufacturing PMI fell to 47.3 from 47.8 and services PMI fell to 51.5 from 53.5.

According to the populist press, these numbers were the reason the Australian stock market yesterday (and Wall Street last night) fell precipitously once more.

Rubbish.

On Friday, August 21, Caixin published a flash estimate of its China manufacturing PMI for August. It suggested a fall to 47.1 from 47.7 in July. That data release triggered the big sell-off on Wall Street, which continued until Beijing implemented further monetary policy stimulus last week. So tell me: what exactly did we learn from yesterday’s numbers that we didn’t already know over a week ago?

Exactly. And indeed, on any other day the fact Caixin’s final result was 47.3, up from the 47.1 originally estimated, we might have even seen a rally. August 21 was simply the straw that broke the camel’s back of suspended disbelief in a slowing global economy, and in particular the overvaluation of US stock markets. Yesterday was simply representative of those investors who were too slow to get out on the first plunge taking a welcome opportunity to get out after a rebound.

Absolute text book stuff.

And which sectors were the hardest hit on the Australian market yesterday? None of them. Bar industrials (-0.8%), which carries several large cap defensives, every sector was down evenly around 2%. It was a market sell-off, and absolutely nothing to do with PMIs. The PMI releases simply waved the flag to say “Get out now!” given second-wave selling had already begun on Monday.

Meanwhile…

Meanwhile, back in the real world, yesterday’s Australian June quarter current account numbers disappointed. The trade deficit was wider than forecast because while imports were flat over the period, exports fell by more than anticipated. The net terms of trade fell by 3.4% to be 10.6% down year on year.

It’s a story of commodity prices and not of volumes. The good news is that even if prices remain low, which they likely will for some time, the positive effect of the now much lower currency is yet to flow through to dollar values. The Aussie began and ended the June quarter at around 76, with a little trip to 81 in between. This morning it’s around 70. And export volumes are soon to be significantly boosted by long awaited LNG exports.

In further good news, July building approvals jumped 4.2%, it was revealed yesterday, to be up 13.4% year on year. There is much talk the apartment building bubble must soon burst, but July saw an 11.7% gain in apartment approvals, to 27.6% growth yoy, while house approvals fell 2.6% but are up 9.6% yoy.

House prices rose 0.3% in August to be up 17.6% yoy, led by Sydney.

As commodity prices slide, LNG exports will boost the terms of trade (in dollar value) while housing leads the non-mining recovery, and the way things are going the Aussie will be back to the two-thirds level (~67) that thirty years ago, when I started in this game, was considered “fair value”.

Little wonder the RBA left rates on hold yesterday, as every man and his dog expected. Aside from a small nod to “softening conditions” in China and east Asia, Glenn Stevens’ statement was pretty much a carbon copy of the July offering.

Oh and by the way, the Australian manufacturing PMI came in at 51.7, up from 50.4. Given the history of this series it could be 41.7 in September, but let us not forget that Aussie.

And for the record, Japan rose to 51.7 from 51.2, the UK fell to 51.5 from 51.9, the eurozone ticked down to 52.3 from 52.4, and the US fell to 51.1 from 52.7. Some ups and downs there, but interestingly, of the global sub-set of manufacturers – Australia, China, Japan, the eurozone and UK – only China is contracting.

Same Pattern

Wall Street also suffered ongoing second-wave selling last night, which saw the Dow drop 200 points from the open and fall to down 500 points just before a slight kick at the close. The pattern is the same, in that the Chinese data simply provided the excuse, not the impetus.

The acceleration of selling throughout the session was fuelled by the oil price, which fell 8%. On any other day, an 8% fall in WTI would be the stuff of Armageddon, but given WTI has rallied 27% from its low in a heartbeat on short-covering, an 8% drop engenders no great shock.

What was most notable about last night’s session on Wall Street is that the volume was much lighter than it was a week ago, when the first wave struck. The fall in the indices did not suggest the same “Get me out!” levels of desperation as last week, more a dearth of buying interest. The smart money is waiting for the muppets to run back and forth in panic before the fear is shaken out and buying opportunities become more secure.

In the background, of course, is Fed debate, and thank God there’s only a couple of weeks to go before we’ll all be put out of our misery. The interesting point to note here is that the US ten-year bond yield closed last night at 2.17%, which is basically where it was at the end of June. The fives and thirties also are sitting around similar yields. The US bond market priced in a slower global economy long before the US stock market did. And as Fed speculation has ebbed and flowed, has just sat there.

Commodities

West Texas and Brent both fell 8% last night, with WTI falling US$3.88 to US$44.22/bbl and Brent falling US$4.42 to US$48.52/bbl. Once again, the press has cited “weak Chinese data”.

This would suggest the oil market assumed that Caixin’s 47.1 flash estimate would leap back up to over 50 as Chinese manufacturing surged in the last week of August, and that markets were simply stunned when this didn’t happen. In other words, rubbish.

WTI jumped 6% two days in a row on thin air short-covering and the sellers came back in last night. It’s common or garden volatility as is always the case when markets adjust to reality rather suddenly.

Base metal trading re-opened in London after a night off for the public holiday, and prices fell. See all of the above. The big moves were in copper, down 1.5%, and nickel, down 3%. Tin actually rose 3% following a surprise drop in inventories.

Iron ore was steady at US$55.70/t.

The falls in commodity prices belied a 0.7% fall in the US dollar index, but the standard converse relationship has been put aside in this volatile period. Gold, nonetheless, rose US$5.40 to US$1139.90/oz.

The Aussie is down 1.3% at US$0.7017, and not because the RBA didn’t cut yesterday.

Today

The SPI Overnight closed down 62 points or 1.2%. The question is whether this is just a double-up reaction to Wall Street’s reaction overnight to the Chinese data, given Bridge Street reacted yesterday.

Or are we going to retest the lows on heightened levels of fear? The Dow closed last night at 16,058, over 700 points above last week’s intraday low. The ASX200 closed yesterday at 5096, about 170 points above last week’s intraday low. The selling on Wall Street last night lacked conviction, and was more about lower prices than heavy volume.

We can put to bed a V-bounce, which no one had expected anyway, and now debate whether a W-bounce features a higher low or a lower low. At the moment the mood favours higher, but it depends on just how bold you want to be.

Australia’s GDP is out today. Look for 2.2%.

US private sector jobs numbers are out tonight ahead of Friday’s non-farm payrolls. If better than expected, Wall Street will lock in September. As to how the market reacts will be interesting.

Rudi will make two appearances on Sky Business today. First at 5.30pm (Market Moves) then again at 8pm when he will host Your Money, Your Call Equities.
 

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All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

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article 3 months old

The Overnight Report: Second Wave

By Greg Peel

The Dow closed down 114 points or 0.7% while the S&P lost 0.8% to 1972 and the Nasdaq fell 1.1%.

Normal Programming

Yesterday Bridge Street witnessed what you might call a bog-standard second wave sell-off having rebounded sharply out of the depths of the correction last week. Markets never V-bounce off a bottom, they always suffer a choppy consolidation period and perhaps even a new low before an existing bull market trend can be re-established.

The clear case in point of such a second wave was provided yesterday by the energy sector. The oil price jumped 6% overnight, yet the local energy sector closed down 1.2%. This just goes to show we were seeing a combination yesterday of traders who bought perceived oversold stocks at their depths taking quick profits, along with Johnny-come-lately selling from investors who were caught in the headlights the first time around.

It was also the last day of the month, and as such a time to put to bed the worst month for the index since the GFC. Most of the damage was done from the opening bell, but there was some further choppiness as the day proceeded. Selling was relatively even across sectors with one exception. With a day’s delay, investors decided Woolies is very sick patient waiting for help to arrive in the form of a new CEO. The consumer staples sector outperformed to the downside with a 2.5% fall.

The lesson for Woolies is: never take the status quo for granted.

Yesterday’s private sector credit data were mildly encouraging, not that the stock market is focused on such trivialities as the local economy at present. Growth of 0.6% in July came in just ahead of forecasts, thanks to a better than expected gain in business credit, which rose 0.7% alongside housing credit’s 0.6% growth.

Housing credit is still running at 7.4% annualised growth to business credit’s 4.8%, which remains low by historical standards. Investor housing credit also rose by 0.6% in the month but – and this is the “but” FOMO buyers might want to pay attention to – it’s the slowest monthly pace of investor credit growth since October 2013.

[FOMO: fear of missing out]

June quarter data showed gross company operating profits fell 1.9%, split into a 1.1% gain for non-mining and a 9.8% plunge for mining. Net profits are down 3.9% year on year, but it’s all about commodity prices. Wages have only risen by a paltry 1.6% over the same period, but they did rise 1.1% in the June quarter, which is mildly encouraging.

Just Some Bad Apples

The Chinese government has confirmed it will no longer be sending in the Plunge Protection Team to prop up the stock market, as the source of the selling has been identified. Jolly good work chaps. Apparently some two hundred rogues were spreading false and malicious online rumours about the market, fuelling the panic.

And there we were all thinking it was a correction.

These despicable outlaws have now publicly confessed and expressed remorse for their actions. With the Communist Party’s PR exercise now over, it is unclear what their fate will be. But having informed the people it was all their fault, at least the families of the rumour mongers will now live.

Five Year Flop

A similar second wave of selling was seen on Wall Street last night, ensuring the worst month for the Dow in five years and the worst August in seventeen. But unlike the Australian market yesterday, the US market was keen to buy energy stocks on rising oil prices.

Having leapt 6% on Friday night, WTI jumped another 6% last night to mark a 27% rebound from the last intraday low. It looks like traders had set themselves particularly short, likely expecting to see the 2009 low price retested. While a 27% rebound in the oil price is very nice for global energy companies in the short term, it’s actually self-defeating in the longer term. If oil cannot sit at sub-50 prices for any length of time, requisite supply curtailment among high-cost marginal North American non-conventional producers will not transpire.

The rise in the WTI price nevertheless helped turn an initial 200 point drop in the Dow from the opening bell, and some renewed feelings of nausea among investors, into only a 100 point drop by the closing bell.

The mood on Wall Street is one of “this is what we expect to see anyway”, so there’s not too much concern. Tonight it will be September in the US, and we all know what that means. T minus 17 days and counting.

Commodities

The trigger for the oil price spike this time around was a US Energy Information Agency report noting US crude output in June fell 1.1% from May. But it’s all just an excuse really. And if WTI heads back to 60 from whence it fell, production will increase again.

West Texas rose US$2.77 to US$48.10/bbl and Brent rose US$3.04 to US$52.94/bbl.

The LME was closed last night for a UK public holiday.

Iron ore rose US20c to US$55.70/t.

Gold is steady at US$1134.50/oz and the US dollar index is off 0.2% to 95.97.

No one expects the RBA to cut today, but the Aussie is down 0.7% at US$0.7112.

Today

The SPI Overnight closed down 21 points or 0.4%.

Today is manufacturing PMI day across the globe, including in China.

Locally the focus will be on the June quarter current account and terms of trade ahead of tomorrow’s GDP result. Monthly building approvals numbers are also due, and the RBA will meet.

There are no earnings reports today (of any consequence).
 

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available in the FNArena Cockpit.  Click here. (Subscribers can access prices in the Cockpit.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's - see disclaimer on the website)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

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article 3 months old

The Monday Report

By Greg Peel

Just A Flesh Wound

Another positive session on Bridge Street on Friday ensured the index actually finished up for the week, as did the grey hair count. But Friday’s session was all about commodity prices, and subsequent 3.7% gains for both the materials and energy sectors. Take those sectors out, and it was otherwise a typically quiet Friday featuring smallish moves.

The August reporting season effectively came to a close on Friday, and now that the volatility of last week appears to have settled down, at least for now, market attention can be concentrated on the score cards and assessments that will follow.

As FNArena’s Result Season Monitor winds to a close, we can note the beat/miss ratio is around 1.6 and the broker ratings upgrades to downgrades is around 3 to 1. If it wasn’t for what’s been going on in the macro realm this month, we might call it a successful season. If we compare it to the last February reporting season, it saw a beat/miss ratio of 1.1 and downgrades outnumbering upgrades almost 2 to 1.

The problem is that February’s result season occurred in a rally, after which the ASX200 closed at 5600 on its way to 6000. At that point, many an analyst was calling stocks overvalued, particularly yield stocks, hence the big downgrade count. In stark contrast, the August season occurred in a correction which accelerated as the month wore on. The index closed on Friday at 5260 having seen 4930, and at the back end of the season, a lot of those upgrades reflected oversold calls as a result of the market sell-off as opposed to micro valuation calls based on earnings results.

The good news for the beaten down commodity names is that commodity prices rallied strongly again on Friday night. The rallies were driven by a combination of short-covering and buying on a belief in oversold levels. At some point commodity prices will settle down again and consolidate, likely at levels lower than a couple of months ago but not as low as the depths of last week.

Relief

Wall Street, too, settled down a bit on Friday night and in S&P500 terms, finished the week higher. The Dow fluctuated on Friday between a hundred points down and unchanged, but in terms of last week, this was a quiet session.

All talk on the Street now is of whether the snap-back rally signifies a bottom is in place, or whether it is just a typical precursor to another leg down. Many assume it will all come down to the September Fed meeting on the 17th.

But to that end, central bankers around the globe don’t seem too concerned about recent market volatility, and also believe the markets are overblowing China slowdown fears. That was the mood emanating for the Jackson Hole symposium on the weekend, which was attended, among others, by the vice chairman of the Fed, the vice president of the ECB and the governor of the Bank of England.

Fed vice chair Stanley Fischer suggested in an interview that nothing that occurred last week will stop the Fed raising at the September meeting. This did not mean the Fed had already reached that decision, he added (personally, I believe otherwise), and it will still come down to data releases over the next two weeks. This Friday night’s US jobs report will basically be the decider, he hinted.

He also gave the first indication of what the move might actually be, suggesting the existing zero to 25 basis point funds rate would be moved to 25-50 basis points. But the most interesting point to note is that despite yet another almost-confirmation from a Fed official, Wall Street didn’t blink. It closed flat. Just how worried is Wall Street about that rate rise? Not all, I suggest.

And as an added element, the BoE governor said he expected to raise UK rates fairly soon. The BoE went very close in the wake of the London Olympics, which provided a big boost to the UK economy, until it became clear it was just a bit of a honeymoon.

Commodities

West Texas crude jumped US$2.71 or 6.4% to US$45.33/bbl on Friday night, to mark a 20% rally from the intraday low of a week ago. Brent rose US$2.30 or 4.8% to US$49.90/bbl.

There is little doubt short-covering was heavily involved, and one outside trigger cited by traders was news Saudi Arabia had sent troops into northern Yemen. News of tropical storms hitting Cuba provided a reminder hurricane season has now begun. Traders also cite genuine buying from those believing last week saw oil trading at oversold levels.

Another seasonal issue for the US oil market is nevertheless the end of the summer driving season, now approaching, and the annual refinery maintenance season which typically follows. When refineries shut down, crude supply builds up in storage centres such as Cushing, forcing down prices until maintenance is complete.

So as with Wall Street in general, there is debate over whether oil has seen the bottom, or could yet plunge once more.

In mixed trade on the LME on Friday night, aluminium, lead and zinc surged 3% and tin 2%, while copper and nickel stayed put. Copper is the only base metal not to close higher for the week. Again, short-covering has been cited among metals, and also the fact it’s a long weekend in the UK and thus the LME is closed tonight.

Iron ore jumped US$2.20 or 4% to US$55.50/t.

With margin call selling now easing, gold found renewed support on Friday. It’s up US$8.90 at US$1133.70/oz.

Commodities rallied on Friday night despite another gain for the US dollar, which is up 0.3% to 96.11 on its index. The Aussie is steady at US$0.7165.

The Week Ahead

The SPI Overnight closed up 12 points on Saturday morning.

As noted, this Friday night sees the US non-farm payrolls report. If it’s positive, lock in a September rate rise.

Over the course of the week, the US will also see the Chicago PMI tonight, construction spending and vehicle sales on Tuesday, private sector jobs, factory orders and the Fed Beige Book on Wednesday, and the trade balance and chain store sales on Thursday.

This week also sees PMIs from across the globe, with manufacturing numbers mostly due on Tuesday and services on Thursday. There are a couple of public holidays about the place this week nonetheless so some dates vary. China is closed on Thursday and Friday.

After a big month of earnings releases, suddenly it’s a big week for Australian economic data.

We’ll see June quarter company profits and inventories today, and the current account including terms of trade tomorrow, ahead of the GDP result on Wednesday. Economists are forecasting 0.4% quarter on quarter growth and 2.2% year on year growth, down from 0.9% and 2.3% for the March quarter.

Monthly data this week include the TD Securities inflation gauge and new home sales today, building approvals, house prices and the manufacturing PMI tomorrow, and retail sales, the trade balance and the service sector PMI on Thursday.

The RBA will meet tomorrow and leave rates on hold, but commentary around China and market volatility will be interesting.

There are a handful of tardy results reports to trickle in this week, but more notably this week sees the ex-divs starting to build. We’ve already had some biggies during result season, but over the course of September a substantial number of stocks will go ex, keeping a lid on prices.

Rudi will appear on Sky Business on Wednesday at 5.30pm and on Thursday at noon. Also, on Wednesday late (9pm) he will host Your Money, Your Call Equities.
 

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

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

article 3 months old

Next Week At A Glance

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.


By Greg Peel

Although the ASX200 is doing a bit of a Friday fade from an early burst as I write, no doubt ahead of exhausted fund managers and brokers heading off for a well-earned streak and bottle of red, we can say for now that the index has lifted back towards post Chinese devaluation levels and overcome the panic of earlier in the week.

As to whether the volatility is now over, and the market can reset to lower Chinese growth expectations in an orderly fashion from here, is still uncertain. Much will depend on Wall Street settling down, which is hasn’t yet, ahead of next month’s Fed meeting.

And more Chinese data loom large next week, if any of it can be believed. On Tuesday Beijing will report its official August manufacturing and service sector PMI’s and Caixin will confirm its manufacturing number, with services to follow on Thursday.

PMIs will also be reported across the globe next week.

If indeed the Fed really is still data-dependent at this eleventh hour, then next week’s US jobs data will be of critical importance. There’ll also be PMI, construction spending, factory orders, vehicle sales, chain store sales and trade numbers to contend with, along with the Fed Beige Book.

It is a very big week for Australia economically. The local results season effectively ends with a bang today, although there are a few tardy names to straggle in early next week.

On a June quarter basis, we’ll see company profits and inventories and the current account, including the terms of trade, ahead of Wednesday’s GDP result.

On a monthly basis, we’ll see PMIs, building approvals, retail sales and the trade balance.

And to top it all off, the RBA will meet on Tuesday.

I should be saying the micro emphasis of result season should now give way to the macro influence of economic data, but given global macro themes and volatility have dominated these past two weeks, the emphasis won’t shift much at all.
 

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