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What to Watch in Australia for the Week Ahead

Published 03/05/2024, 06:08
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Josh Gilbert, Market Analyst at eToro, shares his three things to watch in Australia for the week ahead:

RBA Rate Decision

As the May 7th RBA rate decision looms, recent inflation figures from both the US and Australia have sparked a shift in rate cut expectations. Australia’s inflation rate slowing less than expected in the March quarter has ignited speculation that the RBA’s first potential rate cut may be pushed back to mid-2025, with markets even pricing in the potential for another hike. That does seem far-fetched, but not entirely out of the question.

So, although we may not get another hike, despite market expectations, rates are likely to stay higher-for-longer given the recent data, news that many Australians will be frustrated to hear. Looking ahead to next week, the RBA is set to stay on hold again, leaving the cash rate at 4.35%. However, the focus will be on commentary and language. We saw the RBA shift slightly away from its tightening bias in March, but a more hawkish tone from Governor Michele Bullock might be on the cards next week.


Big Bank Earnings

Investors are eagerly awaiting next week’s financial results for three of Australia’s four biggest banks: Westpac, ANZ, and CBA. Consensus forecasts remain cautiously optimistic about stable earnings. This follows NAB's half-yearly results, which reflected an increasingly challenging landscape. Despite the challenges, NAB lifted its interim dividend to 84 cents per share and initiated a $1.5 billion share buyback, showcasing the potential resilience of the sector.

Macquarie Group's FY24 results this week were similarly challenging due to decreased income and sectoral struggles; the company recorded a 32% drop in net profit to $3.52 billion. Nevertheless, Macquarie's final dividend of $3.85 per share exceeded the market prediction of $3.50. As three of the Big Four unveil their results next week, future focus will likely fall on their strategic tactics to control costs and enhance margins in a fiercely competitive lending environment.

Given the weighting of the financial sector to the ASX200, their results next week will remain a key driver of the local market, and from what we’ve seen so far, it might be a challenging week next week.

Goodman Group Q3 Operational Update

The AI boom has captivated markets globally as companies such as Nvidia (NASDAQ:NVDA) begin to make billions of dollars from the technology revolution. But, as investors look locally, they are greeted with a small basket of stocks from the tech sector. However, Goodman Group is a business that stands out in the AI revolution as Australia’s largest industrial real estate manager. AI spending isn’t slowing down, with both Amazon (NASDAQ:AMZN) and Meta being very open in recent weeks that they intend to re-open their wallets after cutting down capital expenditure in recent years to spend big on AI. Thanks to this demand, global requirements continue to grow for Data Centers, and that helped lift Goodman Group’s operating profit 28% in the first six months of the fiscal year, and the group expect solid growth in the second half of the year, with AI demand in full swing.

Although we won’t get cold hard numbers from Goodman next week, we will be able to see insights into demand for their properties and help give investors a better understanding of what to expect for the full-year result. Nvidia is the name-making money front and centre, but companies like Goodman Group are definitely the background winners of AI.

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