Trading week preview

The ASX200 keeps defying the financial and economic risks plaguing global equity markets.

Kyle Rodda KyleR_IG
Market Analyst, Australia

Publication date : 2018-08-22T00:23:35+0100

Source: Bloomberg

Australian shares registered another decade-long high last week, to close Friday’s trade at 6339, after several weeks failing to break through the psychologically significant 6300-handle. Earnings season gets into full swing this week, with investors hopes of further gains on the ASX resting on the outlook for corporate profits.

After several attempts to break above 6300, the ASX200 finally managed to close above that mark on Wednesday, following strong earnings reports from the likes of Wesfarmers and CSL. The gains appeared to consolidate themselves come Thursday, after QBE, Telstra and Treasury Wine’s results were deemed by investors as being better than expected.

The week ahead for the ASX could be the biggest test yet this earnings season, as investors prepare for fallout of company reports from Woolworths, Fortescue, BHP Billiton, Seven West Media, Lend Lease, and Brambles, to name a few. The market will be looking at the ASX’s ability to climb towards the 6360-mark, given an apparent upward trendline resistance level at that point.

The Winners and Losers

The telecommunications sector clocked the healthiest return for the week, courtesy of better than expected forward guidance from Telstra, which added around 9 per cent during the week’s trade. The burgeoning information technology sector was the next hot performer, followed by the healthcare sector, rallying 4.27% on the back of a positive earning’s report from CSL, that sent that company’s stock to record highs around $217 per share.

The materials and energy sectors struggled most throughout the week, weighed down by the issues in the Chinese economy and emerging markets. Corporate reports under-delivered in materials stocks, with the likes of Iluka Resources Ltd and Mineral Resources tumbling over 16 per cent and 9 per cent respectively. Energy stocks were dented by a dip in oil prices throughout the week, alongside the 7.68 per cent fall in the share price of Origin energy.

The little Aussie battler

The Australian Dollar was one of the worst performing G10 currencies last week, with the embattled NZD/USD the only currency to suffer greater losses than the AUD/USD. The expanding yield disparity and fears around ex-United States economic growth eviscerated the local currency, trading through the course of the week only pips away from the 0.7100 handle.

The AUD/USD has managed to recover some ground over the weekend, as the US Dollar slows its violent tear higher. Re-establishing footing above 0.7310 in the early part of the week will be key for the pair to reclaim some semblance of strength; however, in the long-term, the Aussie currencies fortunes appear skewed solidly to the downside.

The Data Week Ahead

News and data as it relates to macroeconomic fundamentals is a little sparse when compared to previous weeks, but there are a handful of releases relevant to the monetary-policy buffs. Locally, RBA Governor Lowe delivers a speech at an ASIC event on Tuesday, which will preface the release of the RBA’s monetary policy minutes for its most recent meeting.

The major event for the week will be the annual Jackson Hole symposium at the end of this week, at which the world’s pre-eminent central bankers and monetary policy experts will discuss global interest rate settings. This will be complimented by the release of the FOMC’s minutes for their last meeting, with the USD clearly in the spot light as those events unfold.

Trading week preview

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