On the ASX this week, 87 major companies are due to report their profits. Photo: Louie DouvisWith little in the way of economic data to distract, investors will be free to concentrate on another hectic week of profit reports, with Woolworths, Wesfarmers, South32 and Westfield among the highlights.
With S&P/ASX 200 futures pointing to the market opening down slightly on Monday morning, the coming week is the biggest of the August profit season, with 87 major companies due to report.
Around half of listed Australian companies have already reported earnings, with overall profits looking to have fallen 8 per cent in financial year 2015-16 thanks to weakness in resource profits following a tough period for commodities markets, AMP Capital head of investment strategy Shane Oliver said.
But Mr Oliver is more optimistic on the coming financial year, saying the listed corporate sector was “on track for a return to growth in 2016-17 as the slump in resources profits reverses and non-resource stocks see growth”.
Looking ahead, Fortescue reports on Monday; Oil Search, Scentre Group and Healthscope on Tuesday; while Wesfarmers, Boral and Westfield provide updates on Wednesday.
On Thursday, expect profit figures from Woolworths, Amcor, Perpetual and South32, while on Friday, the highlights are Harvey Norman and Coca-Cola Amatil.
Overseas, the overriding focus over the coming days will be the gathering of central bankers in Jackson Hole, Wyoming, with US Federal Reserve chair Janet Yellen speaking on Friday evening.
The title of the symposium, which runs over the weekend, is “Designing Resilient Monetary Policy Frameworks for the Future”.
It’s a hot topic as analysts and economists are increasingly sensitive to signs the developed world’s central bankers are beginning to question the effectiveness of extreme policies, including negative interest rates in Europe and Japan, and a fresh pulse of quantitative easing, or bond buying, that have propped up financial asset prices but have fallen short of sparking growth and inflation in many economies.
Despite the anticipation ahead of the talkfest, John Higgins of Capital Economics said he didn’t expect Ms Yellen to “provide any strong steer on the timing of the next rate hike”.
Investors will likely continue to ponder the resilience of the Australian dollar, which eased last week but looks well supported by the global search for yield – Australia’s cash rate of 1.5 per cent, while historically low, remains relatively high across developed economies.
A key influence is the expected pace of monetary tightening in the world’s largest economy. Over the past few weeks US Fed members have been talking up the odds of a rate hike, but thus far foreign exchange traders “remain unimpressed”, BK Asset Management currency strategist Boris Schlossberg said. “Few players [are] factoring a hike in December, much less September.”
Commonwealth Bank of Australia chief currency strategist Richard Grace believes the Aussie dollar, which fetched 76.25 US cents on Saturday, could lift as high as 78.4 US cents in the coming weeks, thanks to a “benign” Australian economic environment and as the terms of trade stabilises. “However, by year-end another RBA rate cut and another Fed rate hike should bring [the dollar] back to 73 US cents,” Mr Grace said.
Economists will begin piecing together the puzzle of how the domestic economy has performed over the three months to June, with quarterly construction work data due late Wednesday morning. The June quarter national accounts are due on September 7.
“Residential building approvals and commencements data suggest housing investment is likely to have pushed higher to a new record level” over the three months, ANZ economist Daniel Gradwell said. But continued weakness in mining-related engineering construction is expected to drag overall activity lower again.
On Wednesday morning skilled vacancies figures are also released.
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