A quieter week ahead for market, data and policymakers although the big event will be the talkfest on Friday at Jackson Hole in the US where Federal Reserve chair Jay Powell’s set piece speech is set to dominate.
His speech at midnight Friday, Sydney time, is simply entitled “Economic Outlook.”
Following the release of the minutes of the last Open Market Committee meeting which showed the Fed was still running a hard line on rate rises, Wall Street and US investors were forced to think again about the belief that the great rush of higher rates was ending.
Entering Wednesday, Wall Street was up around 12% from the lows of June but Thursday and Friday saw that gain trimmed – especially Nasdaq which lost 2% on Friday as investors abandoned what they think are interest rate sensitive tech stocks.
Investors are now looking to Friday’s speech from Chairman Powell to provide some clarity.
The topic for the Jackson Hole conference this weekend is “Reassessing Constraints on the Economy and Policy”.
Clarity is also something Australian investors will be looking for this week from the June 30 earnings reporting season which hits its busiest week with around 100 major companies due to report covering around 25% of market cap.
AMP Chief Economist Shane Oliver says consensus expectations are for around 20% earnings growth for the 2021-22 financial year but with this boosted by energy earnings (+275%) and industrials averaging around 9.5% growth.
“The focus will likely be on outlook statements given cost pressures, labour shortages and slowing consumer demand,” he wrote at the weekend.
Up till Friday, the reporting season has now seen around 65% of company profits by market capitalisation report. “Overall results are a bit soft, and they have slowed down since the initial recovery from the pandemic lockdowns,” Dr Oliver wrote at the weekend.
“So far only 33% of results have surprised on the upside, 58% have seen earnings up on a year ago & 52% have increased dividends all of which are below average reflecting the cost pressures some businesses are facing.
“Reflecting this only 45% of companies saw their share prices outperform the market on the day results were released which is well below the norm of 54%. A significant proportion of companies have flagged earnings growth this year below inflation,” he wrote.
Companies reporting this week include including Lendlease, Adbri, Ampol; (half) Altium, Adairs, Nick Scali (Monday), Ansell, Boral, Breville Group, Kogan, Reliance Worldwide and Scentre (half year) (Tuesday), Coles, Nine, Tabcorp, Ansell, WiseTech, Worley, Sonic and Seven Group (Wednesday), Qantas, St Barbara, Flight Centre, South32, Appen, Allkem, Whitehaven Coal, Eagers (half year), Zip and Woolworths (Thursday) and Ramsay Healthcare, Costa Group, BWX and Wesfarmers (Friday).
Business conditions activity surveys for August for the US, Europe, Japan and Australia will be released tomorrow (Tuesday) and will likely show further signs of a slowdown, according to the AMP’s Shane Oliver.
“Hopefully, pricing pressures, supplier delivery lags and work backlogs with have improved further adding to signs of a peak in inflation pressure,” he added.
Elsewhere it’s a quite week, though the US will see a second estimate of June quarter economic growth (minus 0.9%);. It’s also the week when the latest data on personal consumption spending and prices is released (it’s the one the US Federal Reserve likes).
The final stocks from the June 30 reporting season – more retailers led by Nordstrom, the department store group.
