DIARY: Economy, Results To Dominate.

DIARY: Economy, Results To Dominate.
February 18th. 2008 - Australasian Investment Review – (AIR)

Everywhere you look there’s potential market influencing events and announcements due this week.

In fact for the third week in a row it will be a unique blend of corporate and economic announcements here and in the US that investors will have to watch out for.

We have already highlighted the series of deals and developments that lie ahead for thelocalmarket this week.

From the results of the likes of Telstra, to Wesfarmers, Babcock and Brown, Fosters, OneSteel and Bendigo Bank in Australia to quarterly figures in the US from retail giant, Wal-Mart, and a slew of reports from European financial groups this week, market sentiment will be tested.

Here the dominant statistics will be the Labour Price Index and the Average Weekly Earnings figures due out Wednesday and Thursday which will keep the focus squarely on economics, the economy and interest rates. Tomorrow’s speech from a senior Reserve Bank official, Assistant Governor, Dr Malcolm Edey, will warm us up.

It’s now clear the RBA has dropped its attempts to run a monetary policy of trying to let the economy grow above 4% and unemployment fall below 5%. According to Macquarie Bank Strategist, Rory Robertson, that policy has gone, swept away by the change of tack in last week’s Monetary Policy Statement.

So that’s why the inflation hawks will be looking closely at the Labour Price Index for December quarter and the AWE for the three months to November to see if there is any sign of a spillover of inflation into wages. If there is, rates will rise at the RBA board meeting on March 4 and if the rise is above 4.4% you might like to start having a bob each way on a 0.50% rise.

When the RBA went for the big club last week to belt inflation and inflationary expectations, no one considered the possibility of a 0.50% rise: a strong rise in wages could make that real.

Minutes from the RBA meeting on February 5 which lifted the cash rate to 7% will be examined for signs of the argument that ended up in the dramatic changes in the Monetary Policy Statement.

And in the US investors want to see progress on rescuing and restructuring the stricken US bond insurance sector: signs are there could be a break-up of the likes of FGIC and perhaps MBIA and Ambac as part of a deal involving Government support and perhaps favourable ratings (And a deal with Warren Buffett’s Berkshire Hathaway).

US investors next week will get minutes from the January meeting of the Federal Reserve’s Open Market Committee that dropped the Federal Funds rate 0.50%, eight days after Chairman, Ben Bernanke cut the rate by an emergency 0.75%.

Producer and Consumer Price Inflation will also be released, along with the monthly figures on housing starts and new home permits: all will be high influential in setting the tone on the US and world markets.

Quarterly profit reports from Wal-Mart Stores Inc and tech giant, Hewlett-Packard Co on Tuesday will provide new insight on consumer sentiment and the profitability of both sectors which have been under increasing strain in the past three or four months.

Friday’s report that US consumer confidence fell to 16-year lows didn’t hurt Wall Street, but smart investors now reckon that most of the US (except the export sector) are close to recession. Former US fed chairman, Alan Greenspan put the chances of a recession in the US at around 50% in a speech on Friday.

Tuesday sees the National Association of Home Builders release its home builder sentiment index. The NAHB/Wells Fargo Housing Market index for February is expected to show a reading of around 19, the same in January. That’s very depressed: readings under 50 mean more builders view market conditions as poor than favorable.

Wednesday sees the US Labor Department will release its Consumer Price Index for January, a day after the producer price Index is released for the same month. The CPI could rise by between 0.2% and 0.3% in the month, according to most US forecasts.

Wednesday also sees the new housing starts figures and building permits for January. Privately-owned housing starts in December 2007 were at a seasonally adjusted annual rate of 1,006,000. This was 14.2% below the revised November 2007 estimate of 1,173,000 and around 24% down on December 2006.

Friday we saw China’s trade surplus for January and this week should see more figures out but the very severe weather in late January (which continued into this month) will influence the inflation figures and growth data (they didn’t impact the trade figures).

The AMP says 52 major companies are due to report in Australia this week for the December interim or full year figures. It will be, along with next week, the busiest weeks of the season. The AMP says overall profit growth is likely to be around 8%, which is well down on growth of around 19% a year ago with cost pressures, the US downturn and the strong $A being the major drags on profit growth.

MONDAY:

Interims expected from Allco Finance Group (delayed from Friday), Vision Group Holdings, Bendigo and Adelaide Banks (newly married), Ausmelt.

TUESDAY:

Minutes from the February 5 Reserve Bank board meeting (which lifted the cash rate to 7%) to be released; Speech by RBA Assistant Governor (Economics) Dr Malcolm Edey to a CEDA conference on the outlook for 2008. International Import Figures for January from the Australian Bureau of Statistics. Interims from Fosters group, GWA International; Oil Search; APN News and Media, Newcrest, OneSteel; Seek, Cabcharge Australia, Sunland, Monadelphous Group, Wattyl, Emeco Holdings, Melbourne IT. Full year figures from Axa Asia Pacific.

WEDNESDAY:

Labour Price Index from the Australian Bureau of Statistics for the December quarter. Interim profits from Wotif, Pacific Brands, Sunland Group, Centennial Coal, Macquarie Airports, Ausenco, Macquarie Office Trust, Biota Holdings, Transurban, Perpetual, Sino Gold, Woodside, Toll, IOOF, Kagara, CSL, Oxiana, The Reject Shop, Macmahon Holdings.

THURSDAY:

Average Weekly Earnings for the quarter ended January from the ABS. New car sales for January, also from the ABS. Interim earnings from Telstra, Qantas, Crown, Paperlynx, Tabcorp, Babcock And Brown, MFS, City Pacific, Collection House, Brambles, Record Realty, Super Cheap Auto, Spark Infrastructure, Auckland Airport, Downer EDI, Fairfax Media, Macquarie Infrastructure, Clough, Australian Infrastructure Fund, DB RReef Trust, Auckland Airport, Kresta, Full year figures from Newmont Mining, Iluka, Santos, Adelaide and Brighton and Virgin Blue.

FRIDAY:

Full year figures from Lihir Gold, Caltex Australia, Minara Resources. Interim earnings from Bendigo Gold, Equigold, Sims Group, Spotless Group, Clive Peeters, Billabong International, Wesfarmers (Not last Friday).

This article is contributed by Australasian Investment Review – (AIR) You can subscribe for their free newsletter at www.aireview.com.au




	
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