Oz Jobs, US Earnings, IMF Outlook – ShareCafe

Oz Jobs, US Earnings, IMF Outlook – ShareCafe

Australia’s labour force data dominates this week – but given the surge in the stockmarket, it’s an odds on bet that investors will ignore whatever message the data carries.

Offshore and the US 4th quarter earnings season steps up pace, major central banks in Japan and the European Central Bank hold policy meeting; the IMF updates its global economic outlook later today and the first surveys of global manufacturing and services activity for January will be released on Friday.

In Australia, economists forecast that the seasonally adjusted unemployment rate rose to 5.3% in December, from 5.2% in November (which looks like a one-off improvement from 5.3% in October).

Employment growth has cooled and in trend, terms came in at 2.1% year on year in November, just above the long-term average of 2% and well below the 3% rate earlier in the year.

There is a good chance that the growth in the labour market fell below the long term rate in December, signalling what could be the start of the long forecast worsening in the jobs outlook.

An indicator of the downturn is that part-time employment has picked up at the expense of full-time positions, which is always a sign of a weakening in demand as employers shift workers to fewer hours.

At best economists think only a few thousand new jobs (mostly part-time) were created in December and they would not be surprised if there was again a loss in full-time positions.

And that’s the major set of figures this week from Australia.

The only major interim profit this week is due out today from the country’s biggest listed investment company, Australian Foundation.

Offshore and the major release is the update of the IMF World Economic Outlook which is due for release tonight from Davos where the World Economic Forum will be boring away for its 50th meeting in Switzerland.

Friday sees the release of the flash business surveys for January from Markit and its various partners. They will give us a flavour about how the world’s major economies have started in 2020.

The Lunar New Year break starts on Saturday and will shut China and several other countries for most of next week and other economies for a day or so.

That will slow stock markets across Asia and commodities markets (because China is the biggest buyer of every commodity).

Central banks in Japan, Indonesia, and Malaysia also meet to decide on monetary policy. The Bank of Japan is off first but economists say it will do nothing

Japan trade for December and South Korean preliminary GDP for the 4th quarter are due out later in the week while the Chinese prime loan rate decision for January will be out later today.

Friday’s production, retail sales, and investment data do not show an economy in need of a hit from a rate cut – especially with the central bank cutting bank reserve asset ratios earlier in the month for an 8th time in two years.

In Europe, the major event next week will be the European Central Bank’s January monetary policy meeting, President Christine Lagarde’s second as the head of the institution.

Economists do not expect any changes from this meeting but we could see the launch of the ECB’s strategic review, which is expected to be completed by the end of this year.

There have been increasing calls for the ECB to tweak its inflation target—either by lowering it, raising it, or making it symmetrical—as observed inflation has remained extremely low for too long.

Economists say Ms. Lagarde won’t say much this week, other than announcing a more specific timeline for the review and make the possible research topics known.

They should include the low-inflation enigma, the price-stability goal, climate change, and digital currencies.

It’s a slow week for data in the US but the country will be gripped by the start of the impeachment trial in the US Senate against President Donald Trump.

The December quarter earnings season dominates the markets this week (See separate story). Reports from Netflix, Intel and Texas Instruments will grab the attention.

The S&P information technology index, which includes Apple, Intel, and Microsoft, has led Wall Street so far in 2020 with a nearly 6% gain. It is up 50% over the past year, the strongest performer over that period.

The index is now trading at 22 times expected earnings, its highest multiple since around early 2005, according to Reuters and Refinitiv’s Datastream.

But Netflix’s results Wednesday morning, Australian time, could very well set the tone for the reporting season.

Investors will be looking to see how well the video streaming giant is coping with the wave of competition led by Walt Disney, Apple, Amazon and a host of smaller challengers.

Netflix shares stumbled last year on worries over slowing subscriber growth (which showed up in the September quarter) and rising production costs. Its shares are down nearly 8% since April 2019, when Disney’s streaming service was announced.

Disney’s stock has risen 24% since then. While Apple shares have jumped by well over 60%.

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