Corporate earnings season wraps up
Published in the Canberra Times, February 2011
Australian stocks look set for a flat or slightly negative start today in response to the Chinese Government's decision to tighten bank lending requirements for the second time this year.
A mixed night for commodity prices on offshore markets is also expected to weigh on the local bourse entering the last full week of the corporate earnings season.
On Friday, China's central bank lifted banks' reserve requirements by 50 basis points, the latest move in a bid to control inflation. Meanwhile, copper and oil prices slipped, but gold did manage to finish higher.
AMP Capital Investors chief economist Shane Oliver said he expected a flat start on the Australian market today.
"I think there might be some concerns about the Chinese tightening and the impact of weaker commodity prices," Dr Oliver said.
Futures markets are pricing in a weak start - at the close of Friday night's session on the ASX24, the March share price index futures contract was 12 points lower at 4910 points, with 4925 contracts traded.
The United States market posted modest gains on the back of profit results from earthmoving equipment manufacturer Caterpillar.
The Dow Jones Industrial Average advanced 0.59 per cent, the S&P500 climbed 0.19 per cent and the NASDAQ ended up 0.08 per cent.
The last full week of the corporate earnings season in Australia has consumer-linked companies such as David Jones, Woolworths, Austar, Coca-Cola Amatil, Virgin Blue and Harvey Norman, among others, presenting their results.
So far during this current round of earnings announcements, Dr Oliver said about 44 per cent of companies reported better-than-expected results, down slightly from the long-term average of 46 per cent.
"The results haven't been worse than feared, they have actually been a little better than feared," Dr Oliver said.
"Hopefully that remains the case over the next week, but I think the next week is going to be a real test.
"I think that the week ahead will be fairly important in getting a handle on how the domestically exposed companies are seeing things."
Wealth Within chief analyst Dale Gillham said he expected the latest corporate results to reflect recent measures of consumer confidence.
"I'd like to see consumer sentiment up, but all the reports that I am seeing are that it is still flat," Mr Gillham said.
"And the forecast is that it will still be flat."
In economics news. the Australian Bureau of Statistics is due to publish the latest round of wages data, as well as figures on construction work and projected capital expenditure, data that will help paint the picture for inflation and growth expectations.
Also, Reserve Bank of Australia governor Glenn Stevens is scheduled to deliver a speech in Melbourne on Wednesday.
The Australian dollar finished the weekend offshore session at $US1.01, up from Friday's local close of $US1.01. On Friday, the benchmark S&P/ASX200 index slipped 0.03 per cent, while the broader All Ordinaries closed flat.
