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Wednesday, October 4, 2023

Diary: a fine line between pain and gain

More focus on central banks and interest rates this week as investors continue to wonder if it will be pain or gain from here.

Big investors are not convinced about the sustainability of the weak rally (see separate article), Twitter’s faltering progress towards a possible collapse is starting to worry markets, the FTX debacle and other losses in cryptocurrencies are raising questions about some Investment companies and a pair of keys. commodities were affected on Thursday and Friday.

At the same time, the first results of the monthly business conditions surveys will be released on Wednesday, providing an update on the health of activity in the Asian, US and European economies.

There are some quarterly results to be released, along with quite a few annual meetings in Australia, and by the end of the week the US will close for the annual Thanksgiving break on Thursday and then the start of the Black Friday sales season, before to Christmas

Decisions on central bank interest rates are expected from the Bank of New Zealand in the middle of the week: the Riksbank in Sweden and the Bank of Korea.

Also, the minutes of the last Fed meeting, three weeks ago, will be released mid-week and will be reviewed for any sign of the ‘Fed pivot’ story. That’s unlikely, but there will be a lot of feedback after it’s released.

In Australia, Reserve Bank Governor Philip Lowe will deliver a major speech in Melbourne on Tuesday.

Governor Lowe’s topic is “Price Stability, the Supply Side, and Prosperity” and he will be watched for more clues on interest rates.

AMP chief economist Shane Oliver says “it’s hard to see how you can add anything new and it would be nice to have a speech on something other than the short-term economic outlook and interest rates, as has been done ad nauseam.” this year”. !”

The final weeks of the June 30 annual meeting season dominate the next five days with meetings planned from BlueScope, WiseTech; Megaport, Harvey Norman, Evolution Mining, Brickworks, New Hope, Liontown Resources, Nick Scali, Queensland Pacific Metals, De Gray Mining, Chalice, Shopping Centers of Australia, Kogan, Qube, Best and Less, Silver Lake and Monadelphous.

Of these companies, business updates are likely to be from BlueScope, Harvey Norman, Nick Scali, New Hope (a quarterly report), and Wisetech. Full-year results were expected on Tuesday from Select Harvests and Technology One. UK ASX-listed bank CYBG is also set to report this week.

In the US, a quiet week except for the Fed minutes (which will generate a lot of publicity). There are also the November business activity surveys and new home sales later in the week, which are expected to be very weak.

The second estimate of US third quarter GDP will be released later this week. Moody’s economists said over the weekend: “The second estimate of third-quarter GDP from the Bureau of Economic Analysis is likely to come in at an annualized rate of 2.6%, unchanged from its preliminary estimate.” That comes out on Wednesday.

There are also durable goods orders and the final survey of consumer confidence from the University of Michigan, which are expected to confirm the initial drop.

US quarterly releases from companies such as Deere and Co, Urban Outfitters, Abercrombie & Fitch, Guess, Dick’s Sporting Goods, Nordstrom, Dollar Tree, Best Buy, Dell and HP are expected.

The Reserve Bank of New Zealand will go ahead with its aggressive tightening and Moody’s says it is looking at a 0.75% hike (again) which will take the policy rate to 4.25%.

“Inflation remains uncomfortably high in New Zealand despite the fact that the central bank is among the most aggressive in Asia-Pacific. The pressures on the supply and demand side are high.

“The relatively high prevalence of fixed-rate mortgages in the country means that households will not feel the full brunt of the monetary tightening until 2023. We have a mild recession built into the baseline forecast for next year as high borrowing costs coupled with elevated inflation cause households to significantly reduce withdrawals,” Moody’s wrote.

“The Bank of Korea is likely to deliver a 50 basis point hike, raising its policy rate to 3.5%. High inflation coupled with a weak won are encouraging the central bank to rise. Households are sensitive to rising borrowing costs due to their relatively high debt burden,” Moody’s economists also predicted.

Glenn Dyer

Glenn Dyer has been a financial journalist and television producer for more than 40 years. He has worked for Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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