The ASX fell sharply today.
The S&P/ASX200 dropped 95.80 points or 1.42% to 6,663.00. Over the last five days, the index is virtually unchanged but is down 10.58% for the last year to date.
Bottom-performing stocks in the index were Adbri Ltd down 21.47% and Costa Group Holdings Ltd down 12.77%.
Adbri lost chief executive Nick Miller in a sudden exit, with cost and weather pressures bearing down on its profit.
"The board has determined that it is an appropriate time for a change in leadership and the board thanked Mr Miller for his service, particularly during the challenges of COVID-19," deputy chair Vanessa Guthrie said.
Mark Irwin will act as interim chief executive on a fixed salary of $1.4 million for six months, starting Tuesday.
"Mark is well-placed to drive this disciplined agenda given his executive track record while continuing to deliver on our previously outlined Net Zero Roadmap," Guthrie said.
"The demand environment has remained robust, however, extreme rainfall events and ongoing inflationary headwinds, particularly energy and diesel costs, have continued to impact margins."
Meanwhile, Costa warned that earnings from its citrus produce will be considerably lower than forecast due to weather conditions and rising costs.
"Adverse weather conditions, including both higher rainfall and cooler temperatures, have persisted. Despite harvest volumes being in line with budget, the previously reported lower quality levels across all citrus regions have continued which has resulted in considerably lower packouts as well as reduced volumes of first-grade fruit for export," the company stated.
"The effort to produce the crop in challenging conditions has also caused an increase in labour expenditure as well as higher spraying costs in relation to pest and disease control.
"The net outcome to date plus the forecast for the balance of the citrus season is expected to translate into full-year EBITDA-S (earnings before interest, taxes, depreciation and amortisation before self-generating and regenerating assets) for the citrus category that is considerably lower than previously forecast."
Looking at the sectors, all were in the red with Materials and Energy taking the hardest hits. The former was down 2.21% dragged down by iron ore, while the latter lost 2.01% for the day. Iron ore hit a two-week low at US$92.60.
Real Estate was the best performer, losing 0.49%.
3 things to watch for the week ahead
Josh Gilbert, market analyst at eToro, shares his three things to watch in Australia this week.
RBA Minutes: The only central bank slowing down
The Reserve Bank of Australia surprised markets with its 25bps rate hike at its October 4 meeting.
The minutes from that meeting will be released on Tuesday this week (October 18).
The RBA’s sixth consecutive rate hike brought the cash rate to 2.6% and expectations are for another two 25bps hikes at the November and December meetings. The RBA was the first major central bank in this current tightening cycle to pivot and slow down the pace of its rate hikes.
In the minutes released this week, we will likely receive further insight into the decision from the board in making this decision.
The RBA likely wanted to slow down the current cycle for rate hikes to have their desired effect, especially amid a decline in the housing market and the pressure rate hikes are having on local households.
However, the previous commentary from the RBA was that they are determined to bring down inflation, which could mean further rate hikes into 2023 if inflation remains high.
AU Unemployment: No signs of cooling
Last week the International Monetary Fund (IMF) downgraded its growth outlook for the global economy, so will this slowly affect the Australian labour market?
On October 20, Australian jobs data will be released, with the unemployment rate set to remain tight with forecasts of 3.5%, in line with August and slightly up from July’s record low of 3.4%.
The jobs data is a key metric for investors to watch as it's a sign of the economy's strength and, importantly, if the RBA’s rate hikes are having the desired effect in cooling demand.
However, the labour market is showing very few signs of slowing down, with participation near record levels. This could see the unemployment rate fall further heading into the end of the year, meaning the RBA may ramp up their hikes again.
China in focus this week: Australia will be watching
It’s a big week in China, with a data dump, and the Chinese Communist Party convenes for its national congress on October 16.
Xi Jinping is expected to be named the country's leader for a third five-year term. The focus from the event for investors will be any indications over the future path of policy in what is a difficult period for the Chinese economy.
On top of this, although unlikely, any indication that the government may be ready to tone down its tough stance on COVID-19 could provide a boost to Asian markets.
Away from the national congress, we receive a slew of Chinese economic data, including Q3 GDP, retail sales, industrial production and jobs data, all of which will give further insight into the Chinese economy.
Its tough COVID-zero policy has a massive grip on the Chinese economy and expectations for the quarter are for growth of 3.5% year-over-year. Although this would signify an increase from August, it is well below the 4.8% projections from August. With China being our biggest exporter, Australia will be watching.
Bonus: The first big tech names in Q3 Earnings Season
This week, Netflix Inc (NASDAQ:NASDAQ:NFLX) and Tesla Inc (NASDAQ:NASDAQ:TSLA) are both set to report their Q3 earnings.
Netflix kicks it all off on Wednesday after the US market closes. It’s been a torrid 12 months for Netflix, as subscribers turned negative for the first time in its history, and shares have fallen 63%.
However, expectations are for Netflix to add just over 1 million subscribers for the quarter, with the Asia Pacific region set to do most of the heavy lifting. We can also expect to hear more regarding Netflix’s ad tier subscription model that is set to roll out in November. Expectations are for earnings of $2.12.
Then on Thursday, after the US market closes, Tesla is expected to hand down its Q3 results. After falling short of delivery expectations a few weeks ago, Elon Musk will be looking to deliver a strong result.
The focus for investors from the earnings call will be on consumer demand, given the weaker delivery numbers, production capacity and the drama surrounding Musk’s Twitter deal. Consensus has Tesla earnings at $1.04 for the quarter.
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