With Anzac Day falling on a Tuesday this year and many Aussies extending the school holidays by a day, it is unsurprising the market is flat today.
So, let’s have a look at what to expect when Australia resumes business on Wednesday.
3 things to watch for the week ahead
eToro market analyst Josh Gilbert shares his three things to watch in Australia in the coming days.
1. Australian Quarterly CPI
It's a huge week on the economic front with the release of the quarterly inflation data that is crucial for the RBA’s next move. The Reserve Bank’s biggest issue continues to be inflation, which remains high at 6.8% after February’s monthly reading.
After a colossal tightening cycle over the last 12 months to tame inflation, the RBA paused in April to assess the state of the economy, given that monetary policy operates with a lag. However, the pause in interest rates may be short-lived if this reading comes in hotter than the market expects, as it did in Q4 2022 at 7.8%.
The monthly inflation indicators are a good reading for the RBA but don’t give the complete picture with a maximum of 73% weight of the overall CPI basket, meaning this reading could provide more surprises. Expectations are for a reading of 7% with a focus on services inflation as overseas migration swells.
After plenty of scrutiny over the last week, Philip Lowe and the board's next move will be more important than ever, and the latest reading on inflation will be the focus for investors next week.
2. Pilbara and Coles hand down quarterly updates
Not long after reporting season, Pilbara Minerals (28th) and Coles (28th) will hand down their quarterly updates next week.
Pilbara Minerals is an investor favourite and saw profits soar in the first half of the financial year thanks to elevated lithium prices. However, in 2023, lithium prices have fallen dramatically, with question marks over EV demand and an end to some government subsidies globally.
However, the key will be the increase in production, which should be outlined next week and help offset falling lithium prices. Profits will still be lower in the second half of the financial year, given the price drop.
Investors will also receive an update from Coles Group, whose shares have outperformed the broader market this year, up 9.2%. Investors were rewarded earlier this year with an increased dividend, and they will be hoping that another solid update can come next week.
With interest rates at decade highs and housing budgets being squeezed, consumers are likely staying at home and spending more in the supermarket, a win for the group. In an uncertain economic environment, investors are looking for a defensive stock and given its essential business model, Coles is just that, so next week will see if the company is still firing on all cylinders.
3. Big tech earnings from Alphabet (NASDAQ:GOOGL) to Meta
This is the most watched week on the quarterly earnings calendar as big tech Alphabet, Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT) and Meta report their earnings. If last week was anything to go by, it might be a tough week ahead with Tesla’s margins squeezed and Netflix’s subscribers missing the mark.
With the Nasdaq 100 soaring 19% this year and valuations for companies such as Amazon and Microsoft climbing, their earnings will be critical to justify their valuations. Last quarter saw resilient earnings, which will be needed again to support 'Big Tech’s' performance so far in 2023.
Meta shares will likely grab investors' attention on Thursday, given the 79% jump in its share price this year. With advertising budgets dwindling, Meta’s earnings are expected to decline 27% year-over-year, but the focus will likely be on cost control after recent job cuts and broader scrutiny over other operating expenses to support profitability.
Meta’s valuation at 17x forward earnings is well below its 10-year average, making it attractive to value investors, but its moderating growth will be under the microscope in next week’s report to see if the social media giant can still deliver.
What's next for Australian stock?
Wealth Within chief analyst and founder Dale Gillham expects any downward movements to be short-lived.
Last week was largely flat with all of the major indices barely moving into positive or negative territory so far. This is not surprising following the strong growth we’ve seen on the All-Ordinaries Index, as it has risen over 6% since the low on March 20.
I mentioned in my last report that I believe in the short term the All Ordinaries Index may have one or two weeks down in the next month. While this week is not technically a down week, if the market closes lower today, then this is a good sign that the fall I am expecting will most likely occur next week.
I am confident that any move down will be short-lived and last around one or two weeks before the market starts to rise again. I am still not convinced of the rhetoric by the doomsayers in relation to their negative opinions about our economy, as I believe 2023 will end up being a good year for investors.
Good solid stocks always alert us to what we might expect in the future and there are certainly many that are giving me confidence about our market for the rest of 2023.
The saying that the masses are usually wrong is typically true when it comes to the stock market and those who ignore the noise will be well rewarded. If you remain patient over the next week or two, you will see some very good buying opportunities unfold.
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