Market Watch, Oct. 2

It’s a new week, new month and new quarter – which means there is a plethora of economic releases due across the world this week.

Being the first week of new month I want to concentration on Australia’s big data dump.

This week sees: Inflation gauges, new homes sale figures, building permits, Australia’s manufacturing, construction and services indices, retail sales figures and the trade balance figures.

In the main, these gauges/surveys/figures have fed positively into the Australian economic view in 2017. However, there is clearly slack in the areas of manufacturing, retail sales and inflation.

I need to highlight the trade balance figures – net exports have held up extremely well this year and, despite the weather’s best efforts to hamper exports, on a value basis net exports have been adding solid points to GDP. With no major interruption in August and some lofty spot prices in bulk commodities, one should expect a solid print on Thursday – a positive on Q3 GDP.

The main event is Tuesday’s RBA meeting – will there be further clarity around ‘financial stability’ for Australia? This is the big question currently, with talk of rates rising in 2018.

Lowe and Co. are certainly more ‘hawkish’ than previous regimes, and have pointed to green-shoot signs in the economy as to why the RBA’s forecasts for GDP and inflation are ahead of consensus and why economists are changing their views on future rate movements.

Therefore, the statement is crucial. I want to see further reasoning around its forecasting, its views on domestic and international growth, its views on inflation and its views on financial sustainability.

Australia is facing organic changes to its finances through market forces which will likely tightening household budgets and investment in 2018. What is the bank’s view on these impactors? With 2018 fast approaching these are the questions likely to be address at this week’s meeting and ones the market want addressed.

Global data this week includes:

Non-Farm Payrolls on Friday night – will it continue to confirm the Fed’s view that employment slack is gone? ISM manufacturing and non-manufacturing data, the US trade balance, jobless changes and new vehicle sales. The US economy is clearly firing, and with most previous indicators and communications from the US suggesting December will be the next opportunity for the Fed to increase rates, positive data this week should all but confirm this action.

Equity trade admin: This week is also likely to be affected by China’s National Day holiday celebrations – it will filter into economic and trade data for October. China is on holidays until Wednesday, with some provinces on holidays until October 8. This may also affect spot pricing in bulks such as iron ore and coal, and may cause a pricing-lead issue in Australian equities. Something to be aware of.