Diary: What is past is merely prelude

If you think the last couple of weeks have seen a lot of news and action in financial markets, then have we got a BIG week ahead for you.

There’s a Federal Reserve rate rise in the US, a high inflation reading from Australia, an economic update Thursday from the Federal Government, the first estimate of American June quarter GDP, inflation and unemployment in the EU and more US earnings in the biggest week of the season and some big names reporting such as Apple and Amazon.

“Next week, I think, is going to be the most important week of the summer between the economic reports coming out, with respect to GDP, the employment cost index and the Fed meeting — and the 175 S&P 500 companies reporting earnings,” said Leo Grohowski, chief investment officer at BNY Mellon Wealth Management told CNBC.

Normally that alone would be enough to dominate headlines. But wait, there’s more…

The Fed rate decision comes early Thursday morning, Sydney time and the US GDP estimate comes less than 24 hours later (see separate story). The latter could show the US economy is close to if not in a ’technical’ recession.

That could change the US debate about rate rises, controlling inflation and economic growth. Key US inflation data emerges Friday to complete a very busy week.

Australia’s June quarter Consumer Price Index is out Wednesday and will drive the size of the interest rate rise here next Tuesday from the Reserve Bank.

Headline quarterly CPI growth likely hit 2.1% in the second quarter thanks to strong gains in food and fuel prices.

While that would be unchanged from the rise in the March quarter, the annual rate could jump from 5.1% in the year to March, to around 6.5%.

That would see the headline CPI on track to reach the Reserve Bank’s 7% forecast by the end of the 4th quarter as higher gas and electricity prices offset easier petrol prices (though that will in turn be offset by the ending of the 22 cents a litre petrol excise cut in September.

Flooding in the eastern states disrupted food supplies and exacerbated price gains in some fresh produce. Meanwhile, fuel prices rose over the quarter as the full force of the Russian invasion of Ukraine was felt at the retail level.

Economists say price pressures have broadened beyond the supply side. Demand pressures have gathered pace, supported by an unemployment rate that is hovering around a 47-year low and accelerating wage growth of 3.5% (lower than in the US and UK).

Job vacancies at record highs suggest the labour market will tighten, putting more upward pressure on wages in some industries in coming months.

Importantly, the June-quarter CPI data will reveal the relative strength of demand- and supply-side price pressures in Australia, as will the forthcoming June 30 reporting period.

Core CPI is expected to have rise from 3.7% to close to 5%.

The RBA is pressing on with its most aggressive tightening cycle in history, and the June-quarter inflation result will likely cement in a hike of at least another 50 basis points for August, according to economists from Moody’s and most market surveys.

Thursday sees Federal Treasurer Jim Chalmers update the budget and the economy ahead of the full budget in October. Watch for lots of negative news and forecasts on inflation, wages and perhaps jobs and growth.

There are some final June quarter and 2021-22 production and sales report due – Fortescue Metals would be the most prominent. Pilbara Minerals is due to release its 4th quarter and 2021-22 revenue data.

Rio Tinto releases its half year results on Wednesday here and in the UK.

Australian Foundation Investment Co, the country’s biggest listed investment company (LIC) reports its June 30 full year performance later today.

Macquarie Group holds its annual meeting on Thursday.

Besides the CPI on Wednesday, international trade indices will be released Thursday and producer price data will be out Friday. Thursday also sees the release of the preliminary retail trade data for June.

That will give the RBA a sighter on how house hold spending has gone after the rate rises in May and June.

In Asia, Thursday sees the release of the advance estimate for June quarter GDP for South Korea with a modest 0.5% rise (quarter on quarter) tipped by analysts.

The EU’s inflation rate for June is forecast to have eased a touch to an annual 8.4% in July from 8.6% in June.

Moody’s economists point out that the full impact of the inflationary surge has yet to show, especially energy prices which look certain to rise from September onwards when further restrictions on Russian oil and gas come into force.

And besides the headline June quarter reports from the likes of Apple, Amazon, Meta, Alphabet and Microsoft, a host of other big US and European companies are due to release quarterlies this week.

These include, 3M, Colgate Palmolive, Procter and Gamble, Astra Zeneca, Pfizer, Mastercard, Visa, Anglo American, Daimler, Nestle, Boeing, KraftHeinz, Ford, GM, Spotify, Coca Cola, McDonald’s, GE, Teck, Basf, Samsun, Merck, Posco, Mondelez, Unilever, Honeywell and Comcast.

There’s also results from the big energy groups, Shell, Totalenergies, Exxon Mobil and Chevron (both out Friday, as usual).