In the US the week begins with data on factory orders on Monday. Following a strong report on durable goods orders, factory orders are tipped to have lifted by 1% in December. On the same day the ISM New York survey is issued together with the employment index.
On Tuesday the usual weekly gauge on chain store sales is issued together the ISM services gauge. Economists tip little movement in the ISM gauge from the healthy 55.7 reading in December.
On Wednesday the weekly measure of home loans is issued while on Thursday the regular US weekly data on new claims for unemployment insurance (jobless claims) is issued alongside data on consumer credit and productivity. And on Friday in the US international trade figures and issued alongside the report of wholesale inventories and sales.
In China the HSBC services index is released on Tuesday and investors will be hoping to see further signs of improving activity. And on Thursday trade and inflation data for January will be issued. Export and import data were solid in December while food prices drove up the result on consumer prices.
Sharemarket, interest rates, currencies and commodities
We have revised up our forecasts for the Australian sharemarket in 2013. This is not something we had to worry about over 2012 as our optimism early in the year was eventually vindicated. But while we have lifted our forecasts, we have essentially retained “soft targets” given that all the world’s problems have not all been solved almost overnight.
The ASX 200 index ended 2012 at 4,648.9 points, having lifted 14.6% over the year. At the start of this year (2013) we tipped the ASX 200 to end the year around 4,900-5,000 points with total returns growing around 10%, around average growth over the past 30 years. Our caution could end up being vindicated but it does appear on current developments that we were too pessimistic, swamped by a “perfect storm” of good news.
Certainly 2013 has started with an air of optimism. US politicians show some willingness to deal with problems, no fresh issues have emerged in Europe and the Chinese economy is exhibiting firmer growth. Volatility has receded with investors keen to put cash to work in other asset classes. We now tip the ASX 200 to lift to 5,300 points by end year – we had previously indicated this as the top of the year’s trading range.
Certainly at some point the sharemarket faces a correction or a period of consolidation. So far this year the ASX 200 is up 5.3%, putting it on track for gains of 65% by end-year. That appears unlikely. Currently we are tipping gains similar to last year, up 14%. But we do warn that many hurdles are still faced by the so-called advanced nations.
In the coming week investor optimism faces a test with the start of the Australian earnings season. On Tuesday the Challenger Diversified Fund is expected to report with Cochlear, Transurban, Reckon and Navitas also listed. On Wednesday Primary Health Care and the REA group are scheduled to report, while Telstra, News Corp, Tabcorp, Flexigroup, Webjet and Australand are listed for Thursday. On Friday, Newcrest and Hutchison Telecommunications are expected to issue their earnings results.
Craig James is chief economist at CommSec.
