Look Ahead: RBNZ rate decision; EZ retail sales; OPEC+; Tesco

(Video Transcript)

Will New Zealand follow Australia on interest rates?

Hello, I'm Angeline Ong and welcome to your Look Ahead to Wednesday, 4 October 2023. And we start with interest rates.

It's been a big week for central banks, New Zealand on deck for the next interest-rate decision. It holds its policy meeting on Wednesday and is widely expected to keep rates steady at 5.5%.

Just showing you the New Zealand dollar, the Kiwi, versus the US dollar here, because it has trades lower.

US dollar boosted by Fed rate decision

However, this is also US dollar's story because with a stronger dollar with the Federal Reserve (Fed) indicating that perhaps there might be one more rate hike on the cards before the end of the year, it is meant that it's given a boost to the dollar versus many other currencies.

Ian Spicer, an economist at Westpac, suspects that the statement from the Reserve Bank of New Zealand (RBNZ) will note the recent flow of economic news has been firmer than expected.

RBA leaves door open for further tightening

Also, I want to show you the Aussie because the RBNZ decides on its interest rates a day after the Australians have decided to keep rates on hold. And this does not mean, though, that the Australians have decided their fight with inflation or keeping inflation at bay is over.

They did leave the door open to potentially further tightening should they need to. The Aussie came off slightly after that decision, extending a slide that was previously seen on Monday. The retreat threatened to support at the recent 11-month low of around 6332.

From the Euro Zone, we have retail sales figures and the producer price index as well. And from the US, it's a key week for jobs data ahead of the non-farm payroll (NFP) report on Friday. We have the ADP employment change, the ISM service purchasing managers' index (PMI) and factory orders to boot.

Where to with the price of oil?

It's also a big week for oil because we have that OPEC+ meeting. And it has to be said that crude has weakened slightly since its meteoric rise from June levels. However, there's a lot there that is playing into the oil prices.

So many to mention, one of them being that no one really knows whether China's consumption is going to pick up pace in the coming year. And Turkey's energy minister also said that the country will restart operations this week on a pipeline from Iraq that has been suspended for around six months.

Now, this weighed on prices as well. OPEC+ is largely seen as standing put on its output policy. Unless there are any surprises, this is a view that is shared by former BP CEO, Bob Dudley, whom I spoke to recently. You can find his interview on the platform.

Plus, on the earnings front, we still do have a few names of note, one of them being Tesco out with first-half earnings.

Tesco earnings an indicator of the state of the retail sector

This being Tesco's share price view because Tesco and the grocery space has been one that our clients have really liked and been a focus for many of the trades because of the extreme volatility, as you can see here, offered by the retail, especially the grocery space.

Tesco is interesting for two reasons: one is the UK economy is coming hopefully out of a two-year cost-of-living-crisis, although it doesn't feel like it on the ground. But inflation does seem to be responding to the many rate hikes that the UK economy has been dealt recently.

Many of the retailers like Tesco, like Sainsbury, have had to rethink their model and we're seeing higher levels of demand for own-store brands.

In terms of downgrades, we've seen four downgrades in the space, JP Morgan downgrading B&M, Ahold, Hayes. Also, Tesco has been downgraded to neutral from overweight.

And Ocado and Sainsbury's, one to also look out for because they have been investing a lot more into technology during this interesting time.

And that's your Look Ahead to 4 October 2023. Until then, you can find more analysis on Twitter @AngelineOng and at IG.com. This is IGTV.