Australia: Which state will come out on top?

·        The handover from July to August occurs with a data deluge. The CommSec State of the States quarterly report is followed by housing, manufacturing and service-sector gauges, new vehicle sales and the retail trade report.  

·         The week kicks off on Monday with the release of the CommSec State of the States report. The report tracks the economic performance of the states and territories across eight key indicators. 

·         On Tuesday, building approvals, private sector credit, new home sales and the regular weekly gauge on consumer confidence from Roy Morgan and ANZ are all released. 

·         On Wednesday, CoreLogic releases the July data on home prices. Based on daily data released so far, home prices have fallen by 0.5 per cent in the five mainland capital cities to stand 2.3 per cent lower than a year ago.

·         Also on Wednesday both AiGroup and the Commonwealth Bank release survey results on manufacturing activity. And the Bureau of Statistics (ABS) issues its Selected Cost of Living indexes for the June quarter, detailing changes over time in the purchasing power of the after-tax incomes of Aussie households.  

·         On Thursday Australia’s international trade balance for June is issued. The trade surplus rose from $472 million in April to $827 million in May. It was the tenth surplus in 12 months. Annual exports to China rose to US$102.65 billion in May – a new record high.

·         On Friday the Federal Chamber of Automotive Industries releases the July sales data for new vehicles. And the ABS issues June data on retail trade. The growth in retail spending has lifted over the past nine months, led by the food and clothing categories. And as tax return time draws closer, the end of financial year new car sales will be closely monitored. SUV sales are at record highs, but passenger vehicles sales are declining.

·         Also on Friday both AiGroup and Commonwealth Bank release their services sector activity gauges.

Overseas: The US Federal Reserve and jobs data trumps China manufacturing activity

·         Over the coming week the US Federal Reserve meets to hand down its latest interest rate decision. And the US non-farm payrolls (employment) report is released. The Chinese manufacturing survey is also a key release. 

·         The week kicks off on Monday in the US when the June index of contract signings to purchase previously-owned homes (pending sales) and the influential Dallas Federal Reserve manufacturing index are issued.

·         On Tuesday China’s official purchasing manager’s indexes are released. A further slowdown in manufacturing activity is tipped. In the US, attention will turn to the S&P/Case-Shiller 20-city home price gauge, the Conference Board’s consumer confidence index and the regular weekly data on chain store sales.

·         Also on Tuesday, the influential Chicago manufacturing survey and the personal income/spending report are issued. The Fed’s preferred measure of inflation – the personal consumption expenditure deflator – will be keenly observed. The deflator is expected to increase by 0.2 per cent for a second successive month in June.

·         On Wednesday policymakers at the US Federal Reserve hand down their interest rate decision. No change in the Federal Funds rate target range of 1.75-2.00 per cent is expected by economists after June’s increase. Additional rate hikes are forecast in September and December.  

·         Also on Wednesday weekly data on new mortgage applications, the ISM manufacturing index and the ADP private sector employment report are issued. Earlier in the day, China’s Caixin manufacturing survey is released. 

·         On Thursday US factory orders are scheduled for June. Manufacturing activity has been supported by strong domestic demand. But growing worker shortages and import tariffs are starting to strain the supply chain. The regular weekly data on new claims for unemployment insurance and the ISM New York index are also issued.

·         On Friday China’s Caixin services gauge is released for the month of July, together with the June international trade data (exports and imports), the ISM services index and the all-important US non-farm payrolls (jobs) report. In June, 213,000 jobs were created and economists expect a further 195,000 jobs were generated in July. Average hourly earnings are tipped to lift by 0.3 per cent, with annual growth remaining at 2.7 per cent.

Financial markets

·         The Australian earnings season is approaching, coming at a time when the Aussie sharemarket has been trading at 10½-year highs. With a valuation of 15.5 times estimated earnings, the ASX200 index is trading around its 5-year average. And at 4.1 per cent, dividend yields for the benchmark are twice that of equivalent US benchmarks.

·         Corporate balance sheets are in good health, profits are near record highs and the lower Aussie dollar may boost the offshore earnings of some companies. Earnings growth expectations are broadly improving, supported by the resources sector. 

·         On Tuesday Credit Corp Group and Alacer Gold report. On Wednesday, BWP Trust, Genworth Mortgage Insurance and Rio Tinto all report. On Thursday, earnings are due from ResMed.