A review of the week past and the week ahead 2018 October 1st

What mattered last week:

• In the U.S., the Federal Reserve raised interest rates by 25bps as expected to sit between 2.00-2.25%. This was the 3rd interest rate hike of 2018 with a 4th expected before year end.
• In New Zealand, the RBNZ kept the official cash rate (OCR) on hold at 1.75%, also largely as expected. The tone of the accompanying statement was broadly unchanged from the dovish August MPS statement.
• U.S. – China trade tensions have become the “new normal” for markets and there is unlikely to be a resolution before the Midterm elections in the U.S. in November.
• The Italian government agreed a 2019 budget def of 2.4% of GDP. This is higher than both the EC and the ratings agencies would be comfortable with, although far lower than feared a few months ago.
• The interim report of the Financial Services Royal Commission was delivered on Friday and provided a scathing assessment of both bank behaviour and the and soft-touch approach by regulators.
• The ASX 200 finished the week about 0.50% higher, but finished September -0.50% lower, while the AUDUSD continues to consolidate below .7300c.

For the week ahead, the key events are:

Australia: RBA Interest Rate decision (Tuesday), building permits (Wednesday), new home sales (Thursday) and retail sales (Friday).

• On Tuesday, the RBA is expected to keep the cash rate on hold at 1.50% for a record 26th month in a row.
• On Friday, the market is expecting retail sales to post a small rise of 0.2% after a flat number last month.

New Zealand: Global dairy trade auction (Tuesday), ANZ commodity prices (Wednesday).

China: Nothing of note

Japan: Q3 Tankan (Monday) and leading economic index (Friday).

U.S: ISM manufacturing (Monday), ADP employment (Wednesday), factory orders and durable goods (Thursday) followed by employment (Friday).

• In August, ISM reached 61.3, its highest level since 2004. The market is looking for ISM to ease a fraction, back to 60.3 for September.

• The labour market is expected to have created 185,000 net new jobs, with the unemployment rate falling to 3.8% and a 0.3% monthly increase in average hourly earnings which lowers the year-over-year rate to 2.8%.

There is a host of Fed speakers due to speak this week including Bostic (Monday and Friday), Kashkari (Monday), Rosengren (Monday), Quarles (Tuesday and Thursday), Powell (Tuesday and Wednesday), Evans (Wednesday) and Brainard (Wednesday).

Canada: Ivey PMI, balance of trade and employment (Friday).

• The Canada labour market is expected to add 25k new jobs in September after a large drop in August of -51.6k.

Euro Area: German retail sales and EA unemployment (Monday), EA retail sales (Wednesday), German factory orders and PPI (Friday).

• German retail sales on Monday are expected to rise by +0.4% after a surprising fall of -0.4% in August.

UK: BoE consumer credit, Markit manufacturing PMI (Monday), Markit services PMI (Wednesday)

Disclaimer

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