News & Analysis

Week Ahead – A Choppy Third Quarter

September 30, 2019

By Deepta Bolaky
 @DeeptaGOMarkets

Week Summary

The reports that President Trump’s administration is considering delisting Chinese companies from the US stock exchanges in a move to limit US investment in Chinese companies caused a panic in the markets as investors digest the latest signs of escalating trade tensions between the two countries.

Week Ahead 

Even though the US Treasury issued a statement on Saturday to deny the closing of Chinese companies from listing shares, the market sentiment will likely remain fragile on Monday. Aside from the various geopolitical themes which will persist through this week, investors are gearing up to a busy week on the economic front with full of market-moving data scheduled across the week.

Central Bank Decisions 

Much attention will be on the Reserve Bank of Australia (RBA) this week. The conflicting messages received from the RBA’s Governor Lowe have somewhat reduced the probability of a third rate cut in the upcoming meeting.

Similar to central bank meetings of other major economies, the rate cut may not come as a surprise as the wave of easing policies have gripped the world markets. However, the focus will be on the signals for further reductions in the cash rate based on how the RBA view the cocktail of global risks. The extent of the weakness of the Aussie dollar will depend on whether the RBA will strike a “hawkish” or “dovish” rate cut.

The series of economic data releases this week will also help market participants to analyse the economic conditions of the Australian economy and the message coming out from the RBA.

Tuesday: AiG Performance of Mfg Index, CBA Manufacturing PMI, Building Permits, RBA Rate Statement, Interest Rate Decision and Governor Lowe’s speech

Wednesday: Exports, Imports, and Trade Balance

Thursday: HIA New Home Sales, and Retail Sales

Friday: AiG Performance of Construction Index

China’s Golden Week 

Ahead of the week-long public holiday in China starting from the 1st to the 7th of October, we will have the latest figures on the manufacturing activities.

  • The NBS Manufacturing PMI is forecasted to remain relatively unchanged, but still in the contraction level at around 49.5. 
  • Caixin Manufacturing PMI is to have slowed from 50.4 to 50.2 but will remain above the key 50 level which signals expansion.

Any figures deviating from the forecasts will have a direct impact on the Australian and New Zealand dollars. 

Nonfarm Payrolls 

Ahead of the highly volatile event – the Nonfarm payrolls scheduled to be released on Friday, investors will take their cues from other incoming data to push the US dollar in a firm direction. 

Monday: Chicago Purchasing Managers’ Index

Tuesday: Fed Speeches, Markit & ISM Manufacturing PMI, and ISM Prices

Wednesday: ADP Employment Change

Thursday: Fed’s Quarles Speech, Jobless Claims, Markit Services & Composite PMI, ism Non-Manufacturing PMI and Factory Orders

Friday: Fed Speeches, Average Hourly Earnings, Nonfarm Payrolls, Labor Force Participation Rate, and Trade Balance

The Labour market continues to be a strong spot for the US economy. Nonfarm payrolls are expected to add 140k. Any stronger or weaker than expected payrolls could reset the tone for the US dollar and forced investors to assess their expectations from the Fed.

Eurozone and the United Kingdom 

In the Eurozone area, Monday will be dominated with Retail Sales, Consumer Prices and Unemployment report from Germany. Across the week, the economic data will be quite scarce compared to other economies. However, the inflation data on Tuesday could add additional pressure on the dominant bearish trend of the shared currency.

Inflation in the Eurozone area has been subdued way before the recent global slow growth which means that the CPI figures are unlikely to surprise significantly on the upside.

In the UK, aside from the GDP and PMI figures, the price action of the Sterling and the UK stock market will most likely remain by Brexit-related comments or developments. After much chaos surrounding the prorogation, the return of the UK Parliament did not bring much clarity to Brexit. It did help the Sterling to gather some ground and edged higher. However, the better mood in the markets can be challenged by potential allegations against the Prime Minister when he was the London Mayor.

Tuesday, 01 October 2019
Indicative Index Dividends
Dividends are in Points
ASX200 WS30 US500 US2000 NDX100 CAC40 STOXX50
0 0 0.129 0.024 0.887 0 0
ESP35 ITA40 FTSE100 DAX30 HK50 JP225 INDIA50
0 0 0 0 0 0 0

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