Weekly Market Outlook

Five Things You Need to Know to Start Your Day

Japan’s fiscal stimulus announcement disappoints, RBA cuts rates to a record low, and European banks slump. Here are some of the things people in markets are talking about today.

Fiscal disappointment

Japan’s government has announced 4.6 trillion yen ($45 billion) in extra spending during the current fiscal year, as part of the 28 trillion yen stimulus package Prime Minister Shinzo Abe flagged in a speech last week. The yen climbed to the highest level in three weeks following the release of the spending details, which only amounted to a small part of the headline number, and was trading at 101.72 to the dollar at 5:52 a.m. ET. Former Japanese Vice Finance Minister Eisuke Sakakibara warned that the currency could strengthen to 90 against the dollar in an interview on Monday. Japan’s Topix index fell, closing 1.6 percent lower, as reports of the stimulus details emerged.

Reserve Bank of Australia cuts rates

Monetary policy still holds sway in Australia, where the RBA cut its benchmark rate by 25 basis points to a record-low 1.5 percent. The Australian dollar initially sank following the rate decision, but changed course to trade as much as 0.2 percent higher by 6:05 a.m. ET as analysts say the cut could signal the end of the central bank’s easing cycle. The yield premium of Australian bonds over Treasuries fell to the lowest in 15 years following the decision.

European banks hit again

The Euro Stoxx banks index was 3 percent lower at 6:01 a.m. ET as investors continue to digest the results of the European Banking Authority’s stress tests of 51 lenders and react to news from Commerzbank AG, Germany’s second-biggest lender, that it is scrapping its full-year profit target. There was bad news for Deutsche Bank AG and Credit Suisse AG as both banks were deleted from the Stoxx 50 Index. Commerzbank was 8 percent lower at 6:10 a.m., Deutsche was down 3.3 percent, and Credit Suisse had dropped 5.3 percent.

Oil recovery coming?

Crude continues to trade near $40 a barrel this morning, with a barrel of West Texas Intermediate for September delivery at $40.45 at 6:17 a.m. ET. Analysts are looking beyond the current slump, with the median estimate of at least 20 forecasts compiled by Bloomberg seeing the price of oil rallying to an average $57 a barrel in 2017. The price rise will be driven by further reduction of the supply glut that has seen the price of the commodity fall by 22 percent since its June high.

Autosales data

While the big data point this week for the U.S. economy is Friday’s payrolls number, today investors get a look at the health of the consumer. At 8:30 a.m. ET personal income and spending numbers for June are released, with economists expecting both to increase 0.3 percent. Also today, autosales data for July is due, with total vehicle sales expected to increase to 17.3 million units, up from June’s 16.61 million.