Local markets will be eagerly awaiting the US July consumer price inflation data midweek which, after the huge jump in jobs last month, could once again change the outlook for US interest rates.
But they will have to tear themselves away from that and focus on the stepped-up local June 30 profit reporting season, led by one of the most important – the Commonwealth Bank’s (CBA) full year figures on Wednesday.
The ASX 200 should start the week on a soft note today after the overnight futures market ended down 7 points at the close early Saturday morning, Sydney time.
That was after the ASX 200 rose nearly 0.6% on Friday to 7,015.6 at Friday’s close, locking in a gain for the week of 1.01%.
This week sees seventeen major ASX 200 companies reporting including Suncorp (today and more on its proposed bank sale to the ANZ), Computershare and CBA (Wednesday), Mirvac, AMP, QBE and Telstra (Thursday) and Resmed (June quarter) & Insurance Australia Group (Friday). Also reporting Aurizon, the rail group, which is due to report today, Mirvac Thursday and Baby Bunting on Friday.
The AMP’s 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 the outlook given cost pressures, labour shortages and slowing consumer demand.”
The US reporting season is in its last stretch. Corporate earnings have come out stronger than expected for the second quarter, with some 87% of S&P 500 companies have reported and 75% have beat earnings estimates.
Earnings growth expectations for the quarter rising from 5% at the start of the reporting season to now 9.2%, and on track for 10%. Dr Oliver wrote at the weekend that this is far stronger than expected.
“Outlook comments have been mixed reflecting the uncertainty regarding the growth outlook but not overwhelmingly negative. Earnings growth outside the US has remained stronger at around 16%,” he added at the weekend
Energy company reports (Exxon, Chevron, Shell, BP, Occidental etc) have boosted those US profit numbers.
Disney, Fox Corp and News Corp are the media companies reporting this week. Some early retailers, Wendy’s, Dillard’s (a department store), Hanesbrands (which owns Bonds in Australia) and Ralph Lauren.
Wynn Resorts, the casino group reports and some investors will be looking to see the size of the loss from the shutdown in Macau in the quarter and Covid. Tyson Foods (chicken) is also due to report as well.
Major miners include Barrick Gold, the world’s second biggest gold group and Lundin Gold, a Canadian company.
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Wall Street ended the week unsettled because of the unexpectedly robust jobs data for July. The US labour market generated 528,000 new jobs in July, almost double the 258,000 average forecast in the market.
In fact the jobs data for June and May lifted by an extra 28,000 as well, so in effect 556,000 new jobs were reported on Friday. Wage growth also rose more than estimated, up 0.5% for the month and 5.2% for the year which was just under the 5.3% rate in June and the sharper 5.7% rate in January.
That changed all thinking from the market about the Fed’s next move.
There’s no meeting of the central bank this month – it’s the Jackson Hole symposium in Wyoming run by the Kansas Fed on August 25-27. That means the next rate decision won’t come till late September when the Fed’s Open Market Committee next meets.
That lessens the immediate impact of this week’s July CPI and means the August data will be available for the Fed in September, as will the August jobs data.
So unless the CPI jumps well past 10% (forcing a very rare between meetings rate increase), the flow of data could upset markets but there won’t be any way of easing pressures, so the next two months trading could revert to the volatile conditions we saw in May and June
The Dow rose 76.65 points, or 0.23%, to end at 32,803.47 on Friday but even with that gain, it fell 0.1% on the week.
The S&P 500 shed 0.16% to end at 4,145.19, and the Nasdaq lost 0.50% Friday, falling to 12,657.56. Still, both the S&P 500 and the Nasdaq ended the first week of August higher – 0.4% and 2.2% respectively.
US interest rates rose on Friday in the wake of the unexpected surge in US job numbers last month. The US 10 year bond yield rose 7 points on Friday to close at 2.83%. The rise for the week was just over 18 points.
The Aussie dollar finished close to 69 US cents – down on the day and the week.
