eToro market analyst Josh Gilbert delivers this week’s potential market-moving news events.
AU monthly CPI
On Wednesday we’ll see the release of January’s CPI. With December’s inflation figures coming in below the RBA’s projections, households and the Reserve Bank will be eager to see if the upcoming inflation figures continue their downward trajectory, with CPI falling to 4.1% in Q4, down from 5.4% in Q3 2023.
This week’s data will be the big data point for the Reserve Bank before the board’s next meeting in March, alongside Q4 GDP data. Expectations are for inflation to rise 3.5% year-over-year, stalling slightly from January’s 3.4% and snapping a streak of continuous easing.
Market pricing has shifted in recent weeks, but June is still the first meeting where the expectation is a cut. The good news for the RBA is that data is most likely coming in as expected, leaving the potential for three cuts on the table in 2024.
Inflation remains the most important number in markets and the easing of inflation is a net positive for investors.
This week, the ABS also reported that Australians experienced the highest recorded rise in wages in almost 14 years and the first significant pay increase in nearly three years.
Wages rose by 4.2% in the 12 months leading up to December, slightly surpassing Australia’s inflation rate of 4.1%. This marked the first time since March 2021 that wage growth outpaced inflation, a welcome figure that many Australians will be hoping continues in 2024.
Coles earnings
After Woolworths Group Ltd reported a wider net loss than expected of AU$781 million in the first half of the fiscal year, investors' eyes will be on Coles as they report their half-yearly earnings.
This is especially true given last week’s announcement of Woolworths’ CEO Brad Banducci’s resignation in the wake of a scathing Four Corners report into both of the supermarket giants.
Similar to Woolworths, Coles is also expected to report declining profits, but revenue is set to grow at the fastest pace for almost three years, which may prove to be a silver lining.
Coles has experienced intensifying scrutiny over the past couple of months, with an influx of media interest and the Australian government directing the ACCC to review prices and competition in the supermarket sector following accusations of price gouging.
In 2023, Coles reported a net income of A$1.10 billion for the full year, slightly below analyst estimates of A$1.11 billion, with profits growing by 4.8%.
As the supermarket giant has been transferring some of the increased costs onto consumers to manage the impacts of inflation, it will be interesting to see next Tuesday how negative consumer sentiment affects Coles’ results for the first half of the fiscal year.
It’s a tough period for any businesses in the limelight, as Qantas and Woolworths found out this week. Balancing profitability alongside customer relations is no easy task and this will be an ongoing challenge for Coles.
Flight Centre (ASX:FLT) half-year results
Flight Centre Travel Group Ltd is another company that will be on the radar for investors, following Qantas’ half-year results, which posted profits that beat estimates earlier last week, but a 13% decrease in underlying profit.
Following Flight Centre’s struggle during 2020 due to COVID restrictions on travel, around 15,000 staff were laid off in a bid to greatly reduce costs. This appeared to be a good move for the company, with Flight Centre announcing solid results for FY23, reporting revenue that was up 126% to A$2.28 billion, and EBITDA rising by 260% to A$300 million.
Although travel demand is still high, airfares are beginning to normalise. At the start of February, the airline’s Global Leisure CEO James Kavanagh noted that the cost of flights is experiencing a huge drop this year, with some international economy class fares even falling to pre-COVID levels.
Flight Centre’s upcoming earnings results may be a contrast to Qantas, given they are expected to post a solid jump in profits year over year, but declining from the second half of 2023.
Investors will be focused on future guidance given that the market expects solid profits for the full year that have not been since the pandemic. Any shift away from current guidance will put shares under pressure, but reaffirming guidance will put shares on the front foot.