Market Preview – Apr 10 to 16
The Week Ahead
Much of last week’s economic data was overshadowed by political and military developments in the Middle East and this short week will again likely be dominated in this way again.
The AUD has dropped below 0.7500 USD in the aftermath of these deveopments and the mixed reactions to the latest US employment data released late last week. A softer than anticipated US Non-farm Payroll figure that showed less than 100k new jobs in March was then offset by an accompanying drop in the unemployment rate to 4.5% – the lowest level since 2007. US retail is continuing to struggle with numerous retailers either filing for or preparinig to file for bankruptcy and close their doors. Some measures suggest that around 10% of US retail space is under threat of closure, conversion or rent renegotiation in the next few years.
On the Australian front last week the RBA kept interest rates on hold again. The housing price situation in Sydney and Melbourne in particular remains a significant concern for the RBA whilst the declining AUD will have been received well. Coupled with the geopolitical developments and the strengthening USD, a sharp fall in the iron ore price also helped to kick the AUD lower. The 6.8% iron ore spot price fall has now pushed the price 20% lower than the February peak that saw the highest prices since 2014. Expectations of further declines continue to abound with Chinese iron ore and steel futures also declining with the possibility of a global glut of production emerging as well.
Employment data on Thursday will be the key Australian release for the week following last month’s contraction and unemployment rate sneaking higher to 5.9%. This soft employment result has muddied the watrs for the RBA and its interest rate settings as it struggles to manage the super-buoyant property market and softer overall economic growth.
In New Zealand this week economic data is limited ahead of the Easter holiday. Manfacturing and food price data on Thursday are the only releases of significance this week. The NZD will however need to navigate the increasingly bumpy waters that are emerging internationally with the geopolitical concerns. The dairy industry will have been somewhat pleased with the results of last week’s GlobalDairyTrade auction with a second consecutive price increase, albeit marginal.
It is a big week for British data amidst the ongoing Brexit conversation and other developments. The Bank of England has placed a mid-July submission date for contingency plans from financial firms in regard to Brexit as a means of ensuring that they are ready for whatever terms are negotiated. The prospect of London losing its “passporting” rights to do business in the EU remainsd a vital component of the Brexit terms. Retail sales, CPI and other price measure data will be released on Tuesday with Unemployment and average earnings figures due on Thursday ahead of the long weekend.
The terms of the Greek bailout have continued to dominate European politics and economics and will likely copntinue to do so as the July date of loan maturity edges closer. The EU’s finance ministers have announced that negotiations with Greece will now resume following hold-ups due to Greek arguments with lenders and compliance with the terms.
Chinese price data on Wednesday is the first major data release of the week and this will be followed on Thursday with trade balance figures. The trade data will be keenly viewed through the lens of last week’s meeting between the Chinese President Xi and US President Trump that was somewhat overshadowed by the military developments in the Middle East.