Australian shares are poised for a relief rally, yet investors remain cautious as reporting season intensifies with results from major companies including CSL, Commonwealth Bank, and James Hardie. Futures indicate the S&P/ASX 200 is expected to rise by 1.2 per cent, mirroring Wall Street’s recovery led by technology stocks such as Nvidia. This follows the local sharemarket’s significant plunge on Friday.
Fund managers are maintaining a watchful stance, noting increased turbulence in Australian reporting seasons. The August period saw record volatility, with stocks experiencing substantial movement on results day. Emanuel Datt, chief investment officer of Datt Capital, advises preparedness for volatility, citing the market’s current structure. To navigate this, Datt Capital has increased its cash level to 20 per cent to capitalise on opportunities.
Analysts anticipate that corporate profits will largely reflect the strong Australian economy, which recently prompted the Reserve Bank to raise interest rates. Consensus forecasts suggest a healthy 12 per cent expansion in earnings for the S&P/ASX 200 this financial year, a significant rebound from earlier expectations. This recalibration is primarily driven by surging commodity prices, leading to upgrades across the materials sector, with mining profits projected to jump 30 per cent.
UBS equity strategist Richard Schellbach suggests sticking with cyclical stocks, which align closely with the economic cycle, offering relative safety amid tech sector concerns. Investors are also closely monitoring upcoming US economic data, including employment and consumer price figures, for clues on interest rate outlooks. CSL is a global biotechnology company that researches, develops, manufactures, and markets a range of pharmaceutical products. James Hardie is a leading manufacturer of building materials.
