Monday 21st October 2019
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Annual meetings will dominate the domestic corporate news flow this week and corporate earnings reports from some global household names will provide an insight into how the world economy is faring.
“We will get more pieces of the puzzle that will add to the economic backdrop,” says Mark Lister, head of wealth research at Craigs Investment Partners.
“Those big global multinationals, such as 3M, Caterpillar and Amazon, will give us a really up-to-the-minute finger on the pulse read of where the global economy is at,” he says.
Other multi-nationals reporting this week include McDonalds, Procter & Gamble, Boeing, Microsoft, PayPal, Tesla, Twitter and Visa.
“I put a lot of faith in the tone of those announcements and the outlook statements,” Lister says.
“Economic data is always a little flawed and may not tell you the full picture, but corporate earnings are pretty hard to argue with.”
So far, at least, the earnings season has produced better-than-expected results, although only about 15 percent of US companies have reported so far.
“Everyone's been thinking gloom and doom and everything's turning to custard” but the results are showing economic conditions aren't so bad.
On the local front, AGMs scheduled for this week include PGG Wrightson's on Tuesday, which should shine a light on the agricultural sector while Auckland International Airport and Tourism Holding's meetings on Wednesday, followed by the Qantas meeting on Friday.
The airlines and Tourism Holdings, which are heavily linked to what's happening offshore, should provide a reading on how well the cyclical tourism sector is holding up.
Tourism Holdings, for example, is particularly dependent on tourists from Germany hiring its campervans and indications are that the European economy is close to stalling.
Performance of manufacturing indices for Europe, along with PMIs for Japan and the US, should also provide a steer on those economies.
Mario Draghi will also preside over his last European Central Bank meeting this week as president after eight years in that job. He is expected to cut the ECB's main deposit rate marginally further into negative territory to -0.5 percent from -0.4 percent and to announce further quantitative easing, a form of money printing, to the tune of about 20 billion euros a month.
Port of Tauranga's AGM on Friday should provide some insights into the imports and exports flowing through the nation's largest port.
The TIL Logistics AGM on Wednesday should provide a leading indicator on economic activity at home and Metlifecare will provide some insight into the Auckland housing market at its AGM on Thursday.
Data from the Real Estate Institute released last week showed signs the Auckland market is reviving because, although annual house price inflation remained slightly negative at -0.8 percent in the year ended September, prices in the wider city rose 2.8 percent in the three months ended September and sales volumes in the latest month were up 6.3 percent.
Economists and those in the currency markets are now reassessing how much more stimulus the Reserve Bank needs to provide the local economy after last week's stronger-than-expected inflation data. While the consumers price index rose 1.5 percent, the non-tradeables measure, the parts of the economy that don't compete with imports, rose 3.2 percent.
“While this probably won't dissuade the RBNZ from cutting the official cash rate again in November, it suggests inflationary pressures are not as benign as some might have thought,” Lister says.
The markets are currently pricing in a 97 percent chance of an OCR cut at the next monetary policy committee meeting on Nov. 13 to 0.75 percent from 1 percent currently.
It's a similar story across the Tasman where better-than-expected labour force data for September, with 26,200 new full-time jobs created and a fall in the unemployment rate to 5.2 percent from 5.3 percent, is thought to have given the RBA pause for thought.
The RBA's cash rate is already at 0.75 percent following three cuts so far this year. Markets are pricing in just an 18 percent chance of another cut at its November meeting and a 50 percent chance of another cut before the end of this year.
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