What mattered last week and a preview of the week ahead 11th February

What mattered last week:

  • After a strong start to the year and to the week, markets adopted a more cautious tone after CNBC reported that President Donald Trump and Chinese President Xi were unlikely to meet before March 1, the deadline for tariffs on US$250 billion of Chinese exports, to rise from 10% to 25%.
  • The more cautious climate saw the S&P500 finish the week unchanged after stalling just ahead of the 200-day moving average 2740 area.
  • Also weighting on sentiment was the European Commission downgraded its growth forecast from 1.9% to 1.3% for 2019.
  • While in the UK, the Bank of England lowered its 2019 growth outlook by 0.5% to 1.2%.
  • Not to be outdone, the Reserve Bank of Australia downgraded both its inflation and growth forecasts with growth now seen at 3.0% for 2019 and 2.75% for 2020. The RBA also moved to a neutral bias for interest rates.
  • Post the delivery of the final report into the banking Royal Commission and aided by dovish tones from the RBA, the ASX200 enjoyed a strong rally, finishing the week +3.50% higher at 6071.5.
  • While the AUDUSD fell over -2.0% to close the week below .7100c as the prospect of RBA rate cuts undermined the support coming from a surging iron ore price.

For the week ahead, the key events are:

Australia: NAB business confidence, home loans (Tuesday), Westpac consumer confidence (Wednesday).

  • Home loans (Tuesday): Not traditionally a market mover, however as the fall out from the banking Royal commission continues to impact credit availability a -2.0% fall is expected for the month of December and will capture attention.

The Australian earnings reporting season picks up the pace, with reports from 44 companies this week including AMP, Cochlear, CSL and JB HiFi.

New Zealand: RBNZ Interest Rate meeting (Wednesday), Business NZ PMI (Friday).

  • RBNZ Interest Rate meeting (Wednesday): The RBNZ is expected to leave the OCR at 1.75%. The statement is likely to be dovish, based on downside risks to growth and inflation and this is consistent with the current market pricing of a rate cut in NZ by year end.

China: Balance of trade, new yuan loans (Thursday), CPI (Friday).

Japan: PPI (Wednesday), GDP (Thursday), industrial production (Friday).

U.S.: JOLTS (Wednesday), CPI (Thursday), retail sales, PPI, industrial production, consumer sentiment and TIC data (Friday).

  • CPI (Thursday): Core CPI is expected to rise 0.2% in January, with would result in in core CPI falling to 2.1% on a year-over-year basis from 2.2% in December. Headline CPI should fall for the fourth consecutive month on an annual basis, to 1.5% from 1.9% as falling oil prices continue to impact.

Fed speakers this week include Mester, Bostic, George, Powell and the U.S. earnings reporting season begins to wind down with 333 of the 500 S&P companies already reported.

Canada: Housing price index and manufacturing sales (Friday).

Euro Area: EA industrial production (Wednesday), German flash GDP and second estimate of EA 4Q GDP (Thursday), balance of trade (Friday).

UK: CPI and PPI (Wednesday), retail sales (Friday).

  • Brexit update: With her requests for changes to the withdrawal agreement rejected by the EU, PM Theresa May faces another series of votes in Parliament on Thursday with the most likely outcome being a request for an Article 50 extension.


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