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After a brief pause, share market volatility is set to resume this week as central bank meetings, important economic releases and US company reporting all offer potentially game changing assessments of the global economy and the fortunes of individual companies. Counter intuitive currency moves and resurgent commodities further complicate the investor conundrum.
The US Federal Reserve in almost universally expected to make no moves at the conclusion of its monthly meeting on Wednesday night. However, The Bank of Japan is rated much more likely to act this week, possibly introducing measures other than negative interest rates to kick start the increasingly unresponsive patient that is the Japanese economy. The run of Japanese data in the lead up to the Thursday meeting includes CPI, jobless numbers, retail sales, industrial production and household spending, and could see markets jumping, particularly on stimulus inducing weak data.
More than a quarter of the US S&P 500 companies report this week, including the high growth tech companies and major banks. The surprising recent weakness of the USD has the potential to bolster bottom lines, although any strength in earnings will ironically boost the USD. Currency moves may undermine other fundamental news flows as international investors contemplate a potential inflection point. This may see selling of Australian shares if the current bullish consensus for AUD/USD turns sour on better US company results or a hawkish Federal Reserve.
Frequently Asked Questions about this Article…
Share market volatility is expected to increase due to central bank meetings, important economic releases, and US company reporting. These events could provide game-changing assessments of the global economy and individual company fortunes.
The US Federal Reserve is expected to make no moves at its monthly meeting, but any unexpected actions or statements could influence market sentiment and potentially affect currency and stock market movements.
The Bank of Japan's meeting is significant because it may introduce new measures to stimulate the Japanese economy. This could lead to market reactions, especially if the economic data leading up to the meeting is weak, prompting stimulus measures.
The reporting of US S&P 500 companies, including high-growth tech firms and major banks, could influence market dynamics. Strong earnings might bolster the USD, affecting international investments and potentially leading to shifts in stock prices.
Currency movements can impact investment decisions by influencing the profitability of international investments. For example, a weaker USD might boost US company earnings, while a stronger USD could lead to selling of Australian shares if the AUD/USD consensus changes.
Resurgent commodities add complexity to the investment landscape by affecting currency values and economic assessments. Investors need to consider these factors when making decisions, as they can influence market volatility and investment returns.
Australian shares might be sold off if the bullish consensus for AUD/USD changes due to better-than-expected US company results or a hawkish stance from the Federal Reserve, leading investors to favor US investments.
Investors should watch for key economic releases such as CPI, jobless numbers, retail sales, industrial production, and household spending, particularly from Japan. These data points could influence central bank actions and market reactions.
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