eToro market analyst Josh Gilbert shares his three things to watch in Australia in the coming days.
1. Monthly CPI
Next week, the RBA will receive a crucial data point when monthly inflation is handed down. After last week’s labour report saw Australia’s unemployment rate drop to 3.7%, February’s inflation data, which is set to be released on Wednesday, will give the Reserve Bank a better indication of future rate decisions.
While forecasts indicate inflation may remain steady at 3.4% for a third consecutive month, a hotter-than-expected print could potentially push back expectations for when Australians can see the first rate cut of 2024. But, for now, the recent inflation data we’ve received has shown that price pressures are easing, and that will be exactly what the RBA wants to see again.
Rate cuts are coming this year and the market now sees an 80% chance the RBA will cut rates in August. However, the higher-for-longer take from the board can’t be ignored by investors.
The RBA doesn’t meet again until May, so there will be plenty of data for the board to digest before that time. Inflation remains the most important number in markets right now, locally and overseas.
Central banks’ fight against inflation isn’t an easy one and clearly remains a worry. But, as rate cuts near closer, investors are looking at the rotation to come as we get nearer rate cuts, moving away from the US dollar and tech into cheaper and more cyclical assets
2. Consumer confidence
In light of February's Consumer Sentiment index, we're observing an upward trajectory that's quite encouraging. Last month’s 6.2% rise to an 86 index score, the highest in almost two years, suggests consumers are responding positively to easing inflation and signals that rate cuts aren’t too far away.
Given this trend, it's reasonable to anticipate a similar trend in March, considering the monthly CPI for January saw consumer prices rise 3.4%, going against economists’ expectations of a slight increase from December.
Australian consumers have continued to show resilience in the last 12 months and that was evident through reporting season, with retailers reporting ‘better-than-feared’ results.
The good news for Australian consumers is that January’s CPI figures show a continual decline in annual inflation since the peak of 7.2 per cent in December 2022. However, the market is pushing back on the number of rate cuts this year, in early February, the market was expecting more than two cuts, which has since been pushed to under two cuts, with markets embracing the potential ‘higher-for-longer’ stance from the RBA.
3. BYD earnings
At the start of 2024, BYD overtook Tesla (NASDAQ:TSLA) to become the largest electric vehicle company in the world. If you have any small interest in cars, you may have noticed quite a few ‘BYD’s, or ‘Beyond Your Dream’ vehicles popping up across Australia within the last 12 months. That’s because BYD is set to deliver more than 3 million cars for the full year 2023.
With BYD’s earnings announced on March 26, investors are eagerly anticipating the automotive company’s earnings, which BYD expects to have risen by up to 85.6% year-on-year for 2023. However, the company’s preliminary income figures fell short of market expectations, which could create an interesting dynamic around the earnings announcement this week.
The company has shown robust financial prospects, which is a strong driving force behind its share price appreciation. In the larger EV market context, however, BYD is increasingly facing stiff competition from other key players and the company’s position relative to competitors like Tesla has the potential to impact investor sentiment towards the stock significantly.
The future of the EV market is undoubtedly bright, but it is also highly competitive. Whether BYD can leverage its growth potential to carve out a larger market share remains to be seen. The upcoming earnings report will likely shed more light on this subject, providing key insights into BYD's strategic direction and financial health.