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Bloomberg has the world’s biggest miner scheduled to report earnings after market (around 16:30 AEST). Underlying earnings are expected to grow to around $13.6 billion, with the second-half net profit of $5.87 billion. Full-year sales could increase $68.1 billion, while the final dividend is a fairly contentious issue with calls for $1.21 down to $0.65 cents. The market is still keen to focus on a potential buyback of at least $3 billion, although there are suggestions the announced spin-off of non-core assets may lower the prospect of new capital management initiatives. Traders will also be eyeing cash flow and net debt.
It’s going to be a busy day of earnings with AMC, BHP, TOL, NST, MND, SHL, IAG, ARI, OSH and QBE due. Given the rally on Wall Street we should see the index rally and test the 5600 level again. The RBA minutes at 11:30 AEST should not be too much of a catalyst either way for the equity market.
Comments from Mark Carney have supported the pound overnight, however the gains against the USD haven’t been too pronounced. The fact the Bank of England Governor has stipulated he won’t wait for real wages to increase before lifting interest rates did however cause a ten basis point move higher in the UK ten-year gilt, which suggests we should have seen a slightly more aggressive upside move in cable, but then again we didn’t really see much of a move in interest rate futures. At 18:30 AEST we get UK inflation with CPI expected to fall ten basis points (or 0.1%) to 1.8%, while core inflation is expected to pullback modestly to 1.9%. A number below here could cause a sell-off in the pound. In the US we get CPI and although the Federal Reserve looks at core personable consumable expenditure (PCE), CPI will still be in focus for traders. Like in the UK, headline inflation is expected to ease back which naturally would be a headwind for the USD.
The RBA minutes will be announced at 11:30 AEST today, but are unlikely to cause too much of a stir. Recall that the official statement on August 5 was fairly neutral, but the Statement on Monetary Policy (three days later) was certainly more dovish with the bank cutting its inflation forecast for December 2014 25 basis points to 2.25% and June 2015 by fifty basis points to a range of 1.75% to 2.75%. It also detailed that ‘it should go without saying that those seeking to understand our thinking should, in any event, look not just at the wording in the post-Board statement, nor just that in the minutes, but also at the whole analysis of the economy and the outlook in the regular Statement on Monetary Policy’. Thus, the RBA has detailed to us that the outlook or economic projections are key and with such huge downgrade for economic projections for next year the prospect is we either see rates on hold (my base case) for an extended period, or at some stage we could see a further cut.