Every week is critical as we loom in on the early October meeting of key US and China trade negotiators. And while the stock market is giving off positive signs that a deal could be close, the share price waters have been muddied by a drone attack on a crucial Saudi oil facility.
Iran-backed Houthi rebels in Yemen have claimed responsibility for a drone attack on Saudi Arabia's Abqaiq plant. About half of the country's oil output has been affected and oil price and stock prices are bound to shoot higher today.
Energy stock prices will go higher today and businesses that are big oil buyers should lose a few friends. The level of internationally confusing forces is making investing harder and harder and it comes as we try to work out if our economy and our stock market are poised to go higher.
Over the month, our S&P/ASX 200 Index is up around 3% and for the year-to-date the rise is, wait for it, 20%. And if we throw dividends in, it’s about 22%.
But it’s not only the possibility that a trade deal will happen, which could unleash a global surge of business investment, upgrades to the growth outlooks of economies worldwide and a further leg-up for stocks.
The other big hope out there is that the Oz economy will soon show that it is economically rebounding from within. To date, the results are mixed. Personally, I was hoping that the Westpac consumer sentiment and the NAB business confidence readings last week would add to optimism seen elsewhere in the economy.
Like what? Here are the biggies to note:
• The auction clearance rates and house price rises in Sydney and Melbourne, which show that the huge housing negativity is bottoming out and starting to be replaced by at least guarded optimism.
• Excluding refinancing, the value of owner-occupier home loans rose by 5.3% in July, with investment loans up 4.7%. The number of owner-occupier loans lifted by 4.2%.
• In trend terms, the share of first-home buyers in the home lending market hit a 7½-year high of 29.1%.
• Around $23 billion will be paid out by listed companies to their shareholders in the next four weeks.
• The Australian Industry Group (AiG) Performance of Services Index (PSI) rose by 7.5 points to 51.4 points in August.
• In trend terms, the Internet Vacancy Index rose by 0.4% in July – the first rise in seven months. Record vacancies exist for health and education workers.
• In seasonally-adjusted terms, average weekly ordinary time earnings (AWOTE) rose by 3.1% in the year to May – the fastest growth in six years. The average annual wage is $85,010.
• Employment rose for the 33rd out of 34 months in July, where jobs increased by 44,000. However, economists expected 14,000.
So far the impact of two interest rate cuts have helped the housing sector but not consumer and business confidence. Meanwhile, the tax cuts seem to be a slow burn but we need to see the economy heating up on the back of them soon. And that puts the spotlight on this week’s economic data.
On Tuesday, we see the latest RBA Board minutes, so we will see what the central bank is thinking about the economy and what they could do with interest rates.
Thursday brings the latest population stats and CommSec thinks we’re up 1.6% on a year ago and, on that day, we see how the job market was going in August. The news here has been better than expected but we don’t need to get any negative vibes from the all-important part of the economy.
The tip from economists is a 20,000 rise in employment, which would be a nice rise. Anything bigger could fire up optimists and make the RBA resists another rate cut in October.
That’s the key local influences for stocks and the economy going forward but overseas will have the greatest impact.
Nice-talking between Donald Trump and his Chinese trade buddies is crucial for stocks but so is what the US central bank decides on September 18. An interest rate cut is expected and should help Wall Street power higher but what the Federal Reserve boss, Jerome Powell says will have the biggest impact on stocks.
On one hand he has to say, if needed, he will cut rates more but on the other it would be great if he underlined that a trade deal is the injection the US and world economies need. However, I don’t think he’s prepared to put the pressure on his President, who is the greatest rooting, tooting, tweeting leader of the free world, ever!
It’s another big week for economies and stocks, let’s hope we get the kind of good news that will KO the negativity associated with madmen with drones bombing oil facilties!