Josh Gilbert, market analyst at eToro, shares his three things to watch in Australia in the coming days.
Nvidia earnings
The big question investors have asked in recent months is if the Magnificent Seven are really still 'Magnificent', with a particular focus towards Tesla (NASDAQ:TSLA) following its recent poor run.
However, there is no denying that Nvidia Corporation is still a standout among the seven but investors will be watching to ensure that it doesn’t change this week when it hands down earnings.
Nvidia is undoubtedly dominating AI right now, staying ahead of peers and continuing to see huge earnings growth. As an early sign of what investors can expect from Nvidia, capital expenditures from the biggest tech names, such as Meta and Microsoft (NASDAQ:MSFT), all grew in the quarter, which indicates that the demand for AI is still strong. However, any cracks in demand may not only affect Nvidia but have a broader impact on the tech sector.
Earlier this month, we also saw that Nvidia is not immune to harsh market conditions after the yen carry trade led to a global market sell-off, yet that was a mere blip in the powerhouse's extraordinary growth.
Nvidia is the second-most held stock on the eToro platform in Australia, surpassing Apple (NASDAQ:AAPL) for Q2. Nvidia was also the biggest stock riser for Q2 in Australia, with a notable 31% QoQ increase in holders.
These earnings will be the focus of Wall Street this week and investors will be waiting for these numbers to drop with bated breath.
Its forecast will be in the limelight, especially after recent flaws in its latest chip, which has caused delivery setbacks that may also go on to hurt Microsoft’s next earnings report.
Big AU reports (Pilbara, BHP (ASX:BHP), Qantas)
Australia’s big earnings run continues, with reports due from Pilbara, BHP Group Ltd, Woolworths Group Ltd, Coles Group Ltd and Qantas Airways (ASX:QAN) Ltd this week.
Qantas’ results this week will be a strong focus after competitor airlines Bonza and Rex both entered voluntary administration recently. With reduced market competition for domestic flights, the Flying Kangaroo's FY 2024 results are expected to turn a big profit.
One priority for CEO Vanessa Hudson is rebuilding customer loyalty and trust. In April, the airline announced a shake-up to its frequent flyer program, which involved offering 20 million reward seats to win back customers who struggled to use their points.
With the plan estimated to cost Qantas around $120 million in FY25, it's a bold move from Qantas but a necessary step to improve its trust and brand sentiment moving forward, with its loyalty program a staple with households in Australia.
The ACCC is reported to be closely watching Qantas and competitor Virgin to ensure the airlines don’t price gouge on routes previously covered by Rex, so Qantas will need to remain steadfast in its goal of improving customer sentiment to ensure the airline avoids further reputational damage that could impact its bottom line in FY25.
BHP has been an attractive proposition for investors this year. According to eToro platform data, it was among the top stock risers for Q2 with a 24% QoQ increase in holders in Australia, with contrarian investors looking to take advantage of any weakness.
After a challenging year, dividends will also be a major focus for BHP, after rival mining giant Rio Tinto (ASX:RIO) surprised the market by keeping its generous dividend despite falling profits.
A fun finding: BHP and Pilbara’s earnings will be of particular interest to Perth-based investors, who hold a massive preference for mining stocks. According to eToro platform data, they are 240% more likely to invest in BHP Group and 128% more likely to invest in Pilbara Minerals than the average Aussie. In fact, 10% of the city invests in Pilbara Minerals.
The bottom line is that this week is massive for company earnings, with some of the most recognised Australian companies reporting. Their results are not just important for their shareholders but will likely be the key driver of the ASX200’s performance next week.
Monthly CPI Australia
Come Wednesday, the monthly CPI reading will be handed down, providing a crucial insight into the state of inflation in Australia.
Last month’s reading of 3.8% came in as forecast and undoubtedly provided a sense of relief over at the RBA. Another reading coming in at a similar level as estimated would further solidify the belief that the central bank’s hiking cycle is well and truly wrapped up.
Ideally, the rate will come in lower than 3.8% and bring us closer to the RBA’s target of two to three per cent, which it believes is a sign that inflation has been quelled. This kind of shift will firmly move the conversation towards setting a more concrete window for rate cuts.
There are already strong signs we will see a significant month-on-month reduction in the CPI.
For one, the big banks have pre-emptively cut rates on term deposits, citing the imminent possibility of an RBA rate cut in the coming months – which, conveniently, has the additional benefit of improving the banks’ profit margins. Elsewhere, markets are pricing in an 89% chance that the RBA will cut rates by December, albeit by a nominal amount.
With Jerome Powell hinting towards rate cuts last week, Australia remains a standout among global central banks. Imminent cuts from the Fed may signal a change in the RBA’s hawkish stance within the next month or two, but that shift will need to be supported by improving data, starting with inflation this week.