Earnings season to show inflation impact
Australian investors will soon gain a better understanding of how some of the country's biggest corporations are navigating cost pressures, labour shortages and slowing consumer demand.
Commonwealth Bank (CBA), Telstra, News Corporation, AMP, IAG and QBE Insurance will be among the companies reporting full-year results this week as earnings season kicks into high gear.
The war in Ukraine and related supply-chain disruptions, interest rate hikes, inflation and flooding across Australia's east coast have posed challenges on top of the impact of the COVID-19 pandemic.
Earnings growth is expected to be solid, led by a boost to energy and industrials.
CBA's highly anticipated full-year results, due on Wednesday, come off some weakness in the banking sector, Tribeca Investment Partners fund manager Jun Bei Liu says.
With a market capitalisation of $172 billion, the bank is Australia's second-largest company, behind mining giant BHP.
"There is a bit of nervousness about what is to come, in terms of whether the credit growth will slow substantially, mortgage growth will slow," Ms Liu told AAP.
"Just a little bit of fear about what the commentary might be coming out of CBA."
The bank is tipped to record a net profit of more than $9 billion.
More generally, Ms Liu said the market would examine each company's forward guidance to gauge demand.
"Just because interest rate increases have really only taken place in the last few months - we haven't really seen it filter through the economy yet," she said.
"So anything companies say will be key to understand what the corporate earnings landscape might look like over the next 12 months with this backdrop."
Saxo Capital Markets Australian market analyst Jessica Amir also expects 30-year inflation to be a major theme of reporting season.
"The real focus will be on what companies are guiding for, for the year ahead," Ms Amir told AAP.
She expects fossil fuel companies will unfortunately confound ethical investors by delivering some of the most robust results this earnings season.
"As we look to the future, we see the coal price will continue to hit a new record high and also secondly, the oil price will likely rally up again as we head into the new year," she said.
Meanwhile Australian stocks should have a tame lead-in to the week after US indexes closed mostly lower on Friday.
The Dow Jones Industrial Average rose 76.65 points, or 0.23 per cent, to 32,803.47, the S&P 500 lost 6.75 points, or 0.16 per cent, to 4,145.19 and the Nasdaq Composite dropped 63.03 points, or 0.5 per cent, to 12,657.56.
Australian futures fell 7.00 points to 6914.
The benchmark S&P/ASX200 index on Friday closed up 40.7 point, or 0.58 per cent, at 7015.6.
© AAP 2022