LA Private

Diary

Australian interest rates, US services activity surveys, a nervous global stock market, more company earnings reports, and crucial data from struggling China will all be in focus this week.

Investors will grapple with the negative news of Warren Buffett’s Berkshire Hathaway offloading half its Apple holding and other stocks in a $US75 billion sell-off during the June quarter, which is unlikely to boost confidence in the volatile markets.

The two-day Reserve Bank meeting starting today is expected to leave rates unchanged following last week’s slightly softer inflation figures. Speculation will now center on the timing of the first rate cut. AMP’s Shane Oliver predicts November, but February is seen as more likely.

The RBA will release a new set of forecasts in its third Statement on Monetary Policy for the year tomorrow afternoon.

China’s July trade data, due on Wednesday, is likely to show continued export strength but weak imports, mirroring the trend of recent months. As the Chinese economy falters, the export push appears to be a mere diversion.

Friday’s CPI inflation is expected to remain weak at around an annual rate of 0.4%, with producer prices staying in deflation.

In the US, the services conditions ISM index for July, released tonight US time, is expected to rebound to 51 after June’s slump, according to Dr Oliver.

The Fed’s June quarter bank lending survey, also out tonight US time, will be monitored for any further easing in bank lending standards.

America’s earnings season kicks off this week, with media companies and retailers leading the charge. In Australia, the June 30 reporting season is underway after a tentative start last week.

In the US, 79 S&P 500 companies (including three Dow 30 components) are scheduled to report second-quarter results this week. As of last Friday, 75% of US S&P 500 companies had released their June quarter earnings. While results are generally positive, AMP’s Shane Oliver notes they are “proving more mixed and weaker than hoped for from tech stocks.”

FactSet reports that 78% of companies have beaten earnings expectations, above the norm of 77% but below the previous reporting season. Consensus earnings growth forecasts are now at 8% year-on-year, up from 7.8% at the start of the reporting season, but a late-season slowdown is expected.

“In aggregate, companies are reporting earnings that are 4.5% above estimates, which is below the 5-year average of 8.6% and below the 10-year average of 6.8%,” FactSet reported.

Fox Corp., News Corp, and REA Group—all part of the Murdoch family’s media empire—report later in the week. Disney also reports earlier. Other notable US companies reporting include Airbnb, Caterpillar, CSX, and Yum! Brands. Overseas, Softbank, Honda, Allianz, Commerzbank, NTT, Sony, Glencore, Itochu, Amgen, Aramco, Siemens, and others will release results.

In Australia, this week’s reporting companies include Argo Investments, Mirvac, Transurban, AMP (both half-year), QBE, and Nick Scali. News Corp and REA are due to report on Friday morning.

Arcadium Lithium’s results tomorrow, following the merger between US group Livent and the Australian-Argentinian company Alkem, will be closely watched.

After last week’s shock news from Albemarle halting its Australian expansion, investors will scrutinize this report for any signs of cuts.

AMP chief economist Shane Oliver says Australian consensus expectations are for a 3.5% fall in earnings for 2023-24, driven by a sharp decline in energy sector profits. Miners, banks, and consumer staples are also expected to be down, while utilities, healthcare, and industrials are forecast to deliver strong gains.

Investors should monitor company guidance on consumer spending, cost pressures, and pricing power. Key words and phrases to watch for include “inflation,” “cost pressures,” “challenging conditions,” “headwinds,” and “low visibility.”

Resmed reported a 4% plus rise in New York (down 1.8% in Australia) on Friday, with a very strong 13.5% gain for the week.

Revenue for the three months to June rose 9% to $US1.22 billion ($A1.88 billion), in line with estimates. Net income was up 27% to $US292.2 million, with the company’s gross margin expanding 350 basis points to 58.5%. The quarterly dividend increased from 48 US cents to 53 US cents per share.

These results have allayed fears about the negative impact of weight loss drugs on Resmed, which caused shares to slump more than 13% to $A27.65 in late June. Friday’s close of $31.80 and overall market strength indicate those fears have dissipated.