World Week Ahead: It's the global economy

Monday 5th October 2015

The state of the global economy will be the main theme this week after September’s weak American payrolls report suggested US growth might have hit a rough patch.

A report Friday showed American employers hired 142,000 new workers last month, far less than the 203,000 expected in a poll conducted by Reuters. It was even more disheartening given revisions to August and July which lowered earlier hiring numbers by 59,000.

“It’s a return to risk aversion, companies are retreating back into their shells a bit,” Nariman Behravesh, the Lexington, Massachusetts-based chief economist for IHS, told Bloomberg.

Investors will be hoping for some clarity on the global economy when the International Monetary Fund releases its latest World Economic Outlook on Tuesday ahead of annual meetings of the IMF and the World Bank in Lima, Peru.

There are will be a high degree of focus on central banks in the days ahead with policy decisions in Australia on Tuesday, in Japan on Wednesday and in the UK on Thursday. Also Thursday both the US Federal Reserve and the European Central Bank will publish minutes from their latest, respective policy meetings.

ECB President Mario Draghi will give a speech in Frankfurt on Tuesday, while Bank of Japan Governor Haruhiko Kuroda is expected to hold a news conference on Wednesday.

Among Fed officials speaking this week are Kansas City chief Esther George in Chicago and San Francisco president John Williams in San Francisco on Tuesday. Williams will speak again in Spokane, Washington on Wednesday and Thursday. Minneapolis president Narayana Kocherlakota is in Mankato, Minnesota on Thursday, with Atlanta Fed boss Dennis Lockhart in New York and the Chicago Fed’s Charles Evans in Milwaukee on Friday.

It will be a slightly lighter week on the data front, though there will be an opportunity to assess the momentum of growth in both the US and Europe.

On Monday, the Institute for Supply Management will release its September report on the US service sector and the US labour market index also will be released. On Tuesday, the Commerce Department will release August trade data, the Congressional Budget Office will release a final estimate on the fiscal 2015 US budget deficit on Wednesday, initial jobless claims are on Thursday and August wholesale inventories are on Friday.

In Europe, on Monday euro-zone services PMI for September will be released, German factory orders is due on Wednesday, followed by Germany’s August trade balance and Bank of France September business sentiment on Thursday, and the UK’s August trade balance on Friday.

On the political front, German Chancellor Angela Merkel and French President Francois Hollande each will address the European Parliament on Wednesday, the first ‘joint’ appearance of the two nation’s top leaders since 1989.

Separately on Tuesday, UK Prime Minister David Cameron will give the keynote speech at the Conservative conference, while Greece’s Parliament will hold a confidence vote on Alexis Tsipras’s new government.

Oil investors may get a better view on the outlook from speakers at an industry conference in London including Exxon Mobil CEO Rex Tillerson, Royal Dutch Shell CEO Ben van Beurden and OPEC Secretary-General Abdalla El-Badri. The conference begins on Tuesday.

Meanwhile, the US Energy Information Administration will release its short-term energy outlook on Tuesday.

Finally, this week marks the start of the third-quarter US earnings season. Alcoa will report after the market closes on Thursday.

Earnings are forecast to fall 4.1 percent, according to Thomson Reuters Data, dragged lower by the impact of lower oil prices on energy producers.

"The single most determinant variable is going to be earnings at this point," Mark Freeman, chief investment officer at Dallas-based Westwood Holdings Group, told Reuters. "The market continues to narrow and narrow. We're not about to fall into a bear market, but I'm starting to think the raging bull market is over," he said.

On Friday, the Dow Jones Industrial Average closed 1.2 percent higher, while the Standard & Poor’s 500 Index gained 1.4 percent, and the Nasdaq Composite climbed 1.7 percent.

Friday’s gains helped Wall Street finish the week in the black, with both the Dow and the S&P 500 up 1 percent for the week, while the Nasdaq added 0.5 percent.

(BusinessDesk)

BusinessDesk.co.nz

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