By Craig James

The Reserve Bank and home prices dominate attention in Australia over the week. The Reserve Bank Board meets on Tuesday, Governor Philip Lowe delivers a speech on Thursday, and the Bank will release the latest economic growth and inflation forecasts on Friday.

The week kicks off on Monday, with the release of the CoreLogic measure of home prices as well as the Performance of Manufacturing index. Manufacturing is currently in good shape, while home prices continue to lift across most capital cities. Across the nation, home prices rose by a substantial 1.4 per cent in March, matching similar gains in February and December 2016. In fact, over the four months to March, home prices have accelerated by 4.9 per cent – the strongest four-month period in 18 months. But data currently points to only a modest 0.2 per cent rise in prices in April.

On Tuesday, data on consumer confidence is issued at 9.30am AEST. While the Reserve Bank hands down the rates decision at 2.30pm.

If the Reserve Bank was looking to move rates in any direction, it would certainly have the opportunity to do so on Tuesday given that it would be able to flesh out its reasoning in the Statement of Monetary Policy released on Friday. However, it is a safe to assume that the cash rate is unlikely to move. 

Firstly, the Reserve Bank is relatively comfortable about how the economy is evolving and secondly the Federal Budget is released on May 9. The Reserve Bank Board would want to see the latest fiscal policy measures. 

On Wednesday, the Federal Chamber of Automotive Industries releases industry data on new vehicle sales while the Performance of Services index is also expected.

On Thursday, the Reserve Bank Governor delivers a speech at the Economic Society (QLD) Business Lunch. And the Bureau of Statistics releases international trade figures (exports and imports) for March. In February, the trade surplus lifted from $1,503 million to $3,574 million, powered by a surge in exports. In fact annual growth of exports was the fastest in eight years with exports especially lifting to China, Hong Kong and India.

And on Friday, the Reserve Bank releases the quarterly Statement on Monetary Policy which includes the latest economic forecasts. Investors will focus on any commentary on the Australian dollar and the state of the housing market. In addition on Friday, the Housing Industry Association releases data on new home sales.

Overseas: US employment data and FOMC meeting to dominate headlines

It is a busy week in the US in terms of economic events. The US jobs data will garner the most interest given it is considered the most important of the monthly statistics. Also, the Federal Reserve meet to decide rates.

The week begins on Sunday when China’s National Bureau of Statistics releases the results of purchasing manager surveys for manufacturing and services. Australia and New Zealand will be the first markets to react to the data on Monday.

On Monday, the US version of the purchasing managers manufacturing survey is released together with data on construction spending. 

On Tuesday, the April data on new vehicle and truck sales is released together with the usual weekly figures on chain store sales. New vehicle sales are expected to have lifted by 4 per cent to a 17.2 million annual rate in April.

In China on Tuesday, the private sector Caixin manufacturing survey is released with the equivalent services gauge to be issued on Wednesday.

On Tuesday, the US Federal Reserve begins a two-day meeting (decision 4am in Sydney on Thursday morning). If there was any doubt about the likelihood of a rate hike, it was resolved with the weak jobs data for March. In short, the Fed should do nothing on rates this month. But updated economic forecasts may provide some guidance on the timing of future rate changes.

On Wednesday, the usual weekly data on mortgage applications is released together with purchasing manager surveys for services, and the ADP national employment index of private-sector jobs. 

On Thursday, factory orders, the trade balance and the final reading on durable goods orders for March are released. For the record, factory orders are expected to lift by 0.4 per cent, while a trade deficit of $44.4 billion is expected for March.

Also on Thursday, the usual weekly data on claims for unemployment insurance is issued together with the Challenger job layoffs series. 

On Friday, the US jobs report – non-farm payrolls – is released. And the focus will be on all the key measures – job growth, unemployment and wages. If jobs rise by 193,000 in April as expected with hourly earnings up 0.3 per cent, then the Federal Reserve should remain on track to lift interest rates twice in the second half of the year. Consumer credit data is also released on Friday.

There will also be five speeches by US Federal Reserve officials to watch on Friday.

Financial markets

  • The US profit reporting (earnings) season remains in full swing in the coming week. 
  • Among stocks reporting on Monday are Ferrari and Tenneco.
  • On Tuesday, reporting firms include Apple, Archer Daniels, BP, ConocoPhillips, Gilead Sciences, Merck & Co, MasterCard, and Pfizer.
  • On Wednesday, profit results include those from Carlyle Group, Facebook, Fitbit, Garmin, Groupon, Tesla, Time Warner, Transocean, and Yum! Brands.
  • On Thursday, earnings will come from Alibaba, Peabody Energy, Paramount Group, and Zynga.
  • And on Friday, financial updates will come from Berkshire Hathaway, and Cognisant.

Please note: This week’s report was written by Savanth Sebastian, Senior Economist.

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