Josh Gilbert, market analyst at eToro, shares his three things to watch in Australia in the coming days.
AU unemployment (Thursday)
Unemployment remains a strong focus in Australia’s battle against sticky inflation. While spending does not seem to be abating, the sentiment on the jobs front continues to follow a different narrative as the figure has floated around the 4% mark for months now.
The RBA will likely still want to see unemployment rise to somewhere between 4.25% and 4.75% before year’s end in order to quash this persistent period of inflation. Figures outside of the official unemployment statistics do seem to indicate that we are on track for increased joblessness nationwide.
There is clearly a balancing act for the RBA to manage and another hike may drive unemployment much higher than they would like, which is why for now, rates are likely to stay on hold rather than move higher.
For starters, the number of job ads on SEEK has slipped by 17.1% across the year to date, while the number of applicants per job ad has risen dramatically. You don’t have to be a statistician to figure out that this means we’re seeing Aussies out of work growing increasingly concerned in a tightening job market, as wages also slip below pre-pandemic levels.
eToro’s own data confirms the job market is softening more. According to our latest Retail Investor Beat, the average Australian’s confidence in job security has decreased since Q2, albeit minimally, slipping from 72% to 71%. Young investors (18-34), in particular, are having a significant job security confidence crisis, slipping from 77% confidence in Q1 to 70% in Q2.
It’s a tricky time for Australians managing a mortgage or trying to find work right now and based on current projections, there may be worse conditions to come before the central bank declares it’s put a stake through inflation.
BHP (ASX:BHP) & Rio production updates
It’s been a difficult 2024 for the materials sector. It's the worst-performing sector on the local market this year by far. Lithium miners have led the losses, but heavyweights Rio Tinto (ASX:RIO) and BHP have dragged the sector lower with losses of 11% and 13%, respectively.
This stems from a weaker iron ore price, which has tumbled this year following continued weakness in the Chinese economy and, specifically, the slump in the property market.
Recent data showed that deflation is still a problem in the region, and more support would be needed. However, that weakness this year has sparked interest from contrarian investors. BHP shares saw a 24% increase in holders in Q2, the third largest increase of any stock on the eToro platform in Australia.
Both these mining heavyweights will hand down production updates this week and increased production across all segments of the business will be what investors want to see to offset lower iron ore prices. But, a focus will be on copper, with prices rising by more than 15% this year, and both looking to increase production over the years ahead with BHP’s recent bid for Anglo-American a clear testament to that.
Netflix (NASDAQ:NFLX) earnings
Netflix has had a pretty good start to 2024, with shares rising around 40%, well outperforming rival Disney. This week's earnings look set to show more good news with subscribers still growing at a healthy pace, while revenue and earnings keep growing.
There were initial fears that the streaming service’s password-sharing crackdown could have dramatically hurt user volumes and brand identity when it came into effect last year, but it seems to have been a success.
Netflix added 9.3 million new net subscribers in Q1, whilst revenues climbed 15% year-over-year to USD$9.4 billion. Although revenue is forecasted higher in Q2 at US$9.5 billion, subscriber additions look set to be more modest at 4.8 million. Overall, this is a clear sign that its ad-supported plans are clearly having the desired effect.
Beyond these earnings, Netflix has already provided a middling outlook for the rest of the year and announced they would no longer be reporting subscriber numbers as of next year. This latter point is a significant concern for canny investors who must already grapple with a lack of visibility around Netflix’s equivalent to a ‘box office performance’.
Importantly, profitability is rising and at a solid click. Profits for the full year are anticipated to grow by over 40% to US$8 billion, whilst earnings are set to rise 44% this quarter. Either way, expect some movement from Netflix shares following earnings, with markets anticipating an 8% move either way following the result.