What mattered last week:
- The U.S. and Canada agreed a deal for Canada to remain in a free trade pact with the US and Mexico. The new deal has been labelled USMCA and replaces NAFTA.
- U.S. yields continued higher as various Fed speakers including Fed Chairman Jerome Powell said the central bank could eventually boost its benchmark rate past the neutral level.
- Also supporting the move higher in U.S. yields was another round of strong economic data in the U.S., including ISM business conditions and labour market data with the unemployment rate falling to 3.7%, its lowest level since 1969!!
- U.S. - China relations continued to deteriorate with the white house highlighting the U.S. defence industry as being too dependent on China and vulnerable to hacking. Bloomberg reported a Chinese chip hack has affected 30 U.S. companies.
- Chinese stock and onshore currency markets were closed for the week-long National Day holiday.
- Crude Oil surged to new highs ahead of the start of sanctions against Iran which commence in early November.
- The ASX 200 finished the week flattish, while the AUDUSD made fresh lows and closed the week near .7050.
For the week ahead, the key events are:
Australia: NAB business confidence (Tuesday), Westpac consumer confidence (Wednesday) the RBA Financial Stability Review (FSR) and housing finance (Friday).
- Consumer confidence is expected to recover after a drop in August which followed the uncertainty created by Liberal Party leadership challenge.
- The RBA’s FSR will be watched post the delivery of the interim report into the Financial Services Industry by the Hayne Royal Commission with concerns the fallout may cause a credit crunch of sorts. Keep in mind Australian dwelling prices have now fallen for 12 months in a row and with banks continuing to tighten lending standards, this trend may continue.
New Zealand: Business NZ PMI (Friday).
China: Caixin PMI (Monday), balance of trade (Friday)
Japan: Machinery orders (Tuesday), PPI (Thursday).
U.S: PPI (Wednesday), CPI (Thursday), import prices and preliminary University of Michigan consumer sentiment (Friday).
- Core CPI was surprisingly soft in August, and the market is expecting a rise of +0.2% in September with core CPI rounded up to 2.3% y/y.
Fed speakers include Bullard, Williams, Harker, Evans and Bostic.
September quarter earnings reports commence this week with corporate tax cuts and strong economic conditions expected to see solid earnings growth.
Canada: Housing starts (Tuesday), building permits (Wednesday), new housing price index (Thursday).
Euro Area: German industrial production (Monday), German balance of trade (Tuesday), Euro Area IP (Friday).
UK: Balance of trade, industrial production, monthly GDP (Wednesday). Also, on Wednesday, Bank of England’s Chief Economist Andy Haldane is scheduled to speak.
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