The week ahead 10th of August 2020

Charts (3)

What mattered last week:

  • The S&P500 closed the week up almost 2.5% and just under 1.3% below all-time highs.
  • Supported by good economic data, better earnings reports, and vaccine news.
  • Supported also by stabilization in new coronavirus cases in the U.S. and Latin America as restrictions and the wearing of masks appear to be working.
  • The RBA left monetary policy on hold. Another rate cut appears likely in response to the Covid-19 outbreak in Victoria.
  • Volatility, as measured by the VIX index, closed slightly lower at 22.2
  • U.S. 10-year yields closed higher for the first time in 5 weeks near 0.57%.
  • Gold closed another 3% higher for the week near U.S $2035.
  • Crude oil closed 2.36% higher, at U.S $41.22/bbl.
  • The ASX200 closed 1.30% higher rotating back towards the 6000 area it has been glued to for the past 10 weeks
  • In FX, the AUDUSD retreated on Friday to close for a second week near .7150.

For the week ahead, the key events are:

A key focus for traders this week will again be on new Covid-19 cases in the U.S, Latin America, Europe, and Australia.

Australia: NAB business confidence (Tuesday), Westpac consumer confidence, and wage price index (Wednesday), labour force (Thursday), RBA Governor Lowe speech (Friday).

  • Labour Force (Thursday): As a result of the restrictions in Greater Melbourne that commenced in early July, the expectation is for a more subdued that initially forecast 40,000 increase in jobs. This combined with changes to JobSeeker is likely to see the participation rate increase to 64.4% and the unemployment rate to rise from 7.4% to 7.8%.

June reporting season will continue this week with reports from companies including CBA, Telstra, Woodside, and Newcrest (previews available on the City Index website).

New Zealand: RBNZ interest rate meeting (Wednesday), business NZ PMI (Friday).

  • RBNZ interest rate meeting (Wednesday): The NZ economy has proved to be more resilient than expected. Employment has been stronger than anticipated as has, consumer spending, and the housing market. Offsetting this, international borders look set to stay shut for longer than expected and the exchange rate is approximately 8% higher than forecast in May. As such, the RBNZ is expected to keep monetary policy unchanged and reiterate the cash rate will remain at 0.25% until at least March 2021.

China: CPI (Monday), new yuan loans, total social finance (Wednesday), fixed asset investment, industrial production, retail sales, and employment (Friday).

Japan: Current account and bank lending (Tuesday), PPI, and machine tool orders (Thursday).

U.S: consumer inflation expectations (Monday), CPI (Wednesday), retail sales, industrial production, manufacturing production, and capacity utilization (Friday).

June quarter earnings are winding down with 90% of companies already reported. Watch for reports this week from Cisco and Baidu.

Canada: Housing starts (Tuesday), manufacturing sales (Friday).

Euro Area: German and EA ZEW business survey (Tuesday), EA industrial production (Wednesday), EA balance of trade (Friday).

UK: Labour market report (Tuesday), GDP (Wednesday).

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