Global equities had a decent session all round on Friday night. The S&P500 was up 0.6 per cent and the Dow up 0.4 per cent, while in Europe, the Dax and CaC were each higher 0.8 per cent and 1.4 per cent respectively. Not too bad all things considered, although for the week prices were a little more mixed, with the S&P up 0.3 per cent and Dow off 0.1 per cent.
Now as for what’s in store, there are only a few pivotal data releases out this week and I’m not sure how they'll interact with this overwhelming view that we’re due for a pullback. So far we are in a holding pattern as people wait and see. As to whether we get that pullback or not, I‘m not really going to get into the short-term considerations of that, as the fundamentals themselves don’t suggest a pullback is in order, but that’s the way of the market. That fact itself certainly doesn’t mean we won’t get one – its arbitrary, a guess, and markets do go up and down after all.
Whatever ends up happening, markets – or rather analysts, I should say – received a sharp reminder of why they shouldn’t be unreasonably pessimistic and overreact to disappointing data and excessively negative rhetoric. Of particular relevance to Australia, Chinese exports surged 25 per cent in January and imports were about 29 per cent higher, in both cases a significant jump from the previous month and well above expectations. I should note that US export growth was solid as well in December, up 2.1 per cent, while imports fell about 3 per cent following a surge of almost 4 per cent the month prior.
We – that is Australia – should be receiving a nice little boost to confidence from figures such as strong US jobs growth, rebounding iron ore prices etc. Having said that, we’ll find out this week when we get updates on business confidence from NAB (Tuesday 1130 AEDT) – which is currently at its weakest since the GFC! – and consumer confidence from Westpac (Wednesday 1030) AEDT.
Readers will already know that I don’t think there is too much wrong with the Aussie economy. I do however think there is something terribly wrong with our leaders when it comes to big business and politics (and through them monetary policy). Shareholders should spend more time in removing lazy CEOs and boards. You don’t get paid the big bucks for being constantly afraid, sitting on your hands and waiting for policy makers to do something. Again, who knows what result we’ll see on confidence this week. It should be much higher and there has been a positive response from consumer confidence recently – hopefully it’ll last. Much more likely if the Reserve Bank can show some restraint.
Other data we get an update on this week includes new home landing data today at 1130 AEDT, and there are of course a number of companies reporting this week, including Cabcharge, JB Hi-Fi and Leighton, amongst others (see Business Spectator's earnings calendar for more details).
As to the pivotal stuff abroad, in the US it's likely to be US retail sales Thursday night, followed by US industrial production Friday. Michigan Unis’ consumer confidence survey is also due Friday night, but prior to that there isn’t much – just the usual weekly jobless claims number, and there are several Fed speakers (George, Plosser, Lacker and Bullard). There’s a G20 finance ministers meeting on Friday night, but those meetings rarely produce anything of interest. Other than that, it’s probably worth checking out European industrial production on Wednesday night and euro zone GDP Thursday night.
Have a great week…