US inflation will again dominate the week with the CPI reading for January out late this week and expected to be around 7% to 7.3% according to most forecasts.
Energy prices will again play a big part thanks to the rise in January – and February looks like being a repeat with a big surge in prices last week (6% to more than 7%) with both US crude and Brent rising well over $US90 a barrel, the highest since late 2014.
A high reading is already factored into the market along with a Fed rate rise next month.
Friday’s very solid jobs report for January saw US bond yields rise with the yield on the 10-year T-bond now back at levels last seen in December 2019 – more than 1.92% – before the pandemic started.
If anything the hawkish policy stance from the Fed on inflation and mooted rate rises has answered market demands for action and cost pressures are now just another factor – watch for rising doubts about the quality of quarterly earnings from now on to start being a major concern.
The US earnings season continues but attention here switches to local companies as the flow of December 31 results really gets going this week.
Banks will dominate this week and could very well set the tone for the entire earnings season in the shape of the Commonwealth Bank on Wednesday, along with the ANZ’s first quarter update on this (Monday) morning and the NAB’s update on Thursday.
Analysts are looking at cash earnings of well over $4 billion for the half. The bank earned $3.89 billion in the six months to December 31, 2020, results that were heavily impacted by Covid and dividends were held back by regulatory order.
Analysts think the CBA will ’normalise’ its interim back towards the $2 a share level it paid out as the final for 2020-21. The interim a year ago was $1.50 a share but it paid an interim of $2 a share for the December, 2019 half year.
Westpac’s first quarter update wasn’t very good last week. Even though it reported a 74% lift in cash earnings for the December quarter, the figures were boosted by a series of one-offs and Westpac won headlines by deflecting attention from that weak effort with an update on its accelerated cost-cutting program that will look for $8 billion in savings as quickly as possible.
All up more than 30 major ASX 200 companies are reporting December half or quarterly results this week.
Other reports include James Hardie (today, with the shock sacking of the CEO top of the list for discussion), Suncorp and Computershare (on Tuesday), CBA, Bapcor and Mineral Resources on Wednesday), AGL, AMP, Mirvac, Dower EDI, Minor and ASX (Thursday) and IAG and Bubs Australia (Friday).
Consensus earnings expectations for this financial year are for a 13% rise in earnings led by energy, industrials, and financials, according to the AMP’s chief economist, Shane Oliver.
The Delta and Omicron disruptions will be a key focus will be on outlook statements for the rest of the June year and into the 2022-23 year.
Meanwhile the reporting season in the US, Japan and Europe continues apace this week.
So far 54% of US S&P 500 companies have reported their December quarter earnings with 76% beating expectations which is about average & consensus earnings growth expectations are running at around 24% year on year (yoy) and likely to end up at around 26%yoy.
Hundreds of companies will report from various countries. These will include Toyota, Honda and Nissan, steel giant, Arcelor Mittal, Twitter, Walt Disney, Covid vaccine giants, Pfizer and AstraZeneca, Moody’s and S&P Global, Zurich, Brookefield Asset Manager, AP Moeller (The t=world’s biggest shipping company), Coca Cola, Pepsi, Total, Yum! Brands, CME, BNP Paribas, BP, Unilever, Siemens, Uber, KKR, Credit Suisse, Nissan, Fox, Kellog, Glaxo SmithKline and Pernod Ricard.
Besides earnings, Australia will see the latest National Australia Bank activity survey and the updated consumer confidence data from Westpac and the Melbourne Institute.
