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

What mattered last week:

  • Last week was the 10-year anniversary of the lowest levels that the U.S. stock markets traded to during the dark days of the Global Financial Crisis (GFC).
  • Perhaps in sympathy, and after 10 straight weeks of gains the high beta Nasdaq index closed almost -2.0% lower for the week, as did the S&P500. Elsewhere, the German DAX fell -1.2% and the Japanese Nikkei -2.7%.
  • The falls came despite news that the U.S. and China are closing in a trade deal, China announced further policy stimulus, while the European Central Bank announced another round of TLTROs which will enable banks to tap into cheap long-term funding.
  • In a puzzling reaction to the TLTRO, European banks fell sharply and former “high flyer” Deutsche Bank, is still trading below its GFC low.
  • Concerns of slowing global growth re-emerged, emphasised by US non-farm payrolls rising by just 20,000 on Friday, versus expectations of +180,000. Some questions as to whether the government shut down impacted the data.
  • Nonetheless. the weaker than expected U.S. employment data, resulted in the U.S. dollar index, the DXY retreating from the 2018 97.71 high.
  • In Australia, the economic data was also weak, highlighted by a December quarter GDP print of just 0.2% q/q vs the RBA’s own expectations of 0.6%.
  • The concern that falling home prices and consumer spending will overshadow strong infrastructure spending and the likely announcement of tax cuts/fiscal stimulus in the April budget, has resulted in the market moving aggressively to price in interest rate cuts this year.
  • This helped the ASX200 outperform, shrugging off weakness in other global equity markets to close the week flat at 6203.8.
  • The AUDUSD finished the week lower, though still above the .7000c support area which proved to be very “sticky” again. 

For the week ahead, the key events are:

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

  • Home loans (Tuesday): The large fall in home loans in December was a result of the tightening in lending standards and the impact of the banking Royal Commission. Home loan approvals are expected to fall by another -2.0% in January.

New Zealand: Nothing of note.

China: New Yuan loans, total social financing, retail sales, fixed asset investment, and industrial production (Thursday), house price index (Friday).

Japan: PPI (Wednesday), Bank of Japan interest rate meeting (Friday).

U.S.: Retail sales (Monday), business inventories, CPI (Tuesday), durable goods, PPI (Wednesday), construction spending (Thursday), new home sales, consumer sentiment, capacity utilization, industrial production and JOLTs job openings (Friday). 

Fed speakers on the wire this week include Brainard and Federal Reserve Chairman Powell.

  • Retail sales (Monday): Retail sales surprisingly fell -1.2% in December. A rebound of +0.3% is expected in January.
  • CPI (Tuesday): After the recent rally in crude oil and gasoline prices, headline CPI is expected to gain +0.1%, leaving the y/y rate at 1.6%. Core inflation is expected to gain +0.2% to leave the y/y rate at 2.2%.

Canada: New housing price index (Thursday), manufacturing sales (Friday).

Euro Area: German balance of trade and industrial production (Monday), EA final CPI (Friday).

UK: GDP monthly, balance of trade (Tuesday), Parliament vote on Brexit deal (Tuesday/Thursday).

Parliament vote on Brexit deal (Tuesday/Thursday). A busy week ahead of the 29th of March departure deadline.

  • On Tuesday parliament will again vote on the government’s revised EU withdrawal deal. If as expected the withdrawal deal is rejected, MP’s will then vote again on Wednesday on whether it rejects a ‘no-deal’ Brexit. If parliament rejects both May’s withdrawal deal and ‘no deal’ Brexit, parliament will then be asked on Thursday if it wants to ask the EU for an extension of the Article 50 negotiation period.


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