Profit season on the ASX kicks off in earnest this week, with a backdrop of huge selloffs in commodities, big drops in the tech sector, and a rising interest rate environment. It is very likely to be a volatile ride for equity investors over the next 15 trading sessions. Earnings, revenue growth, profit margins and dividends are all important, but if you want to predict share price movement, consider a company’s guidance for the next period versus consensus estimates. Trends during the past couple of seasons have been big moves in large cap stocks immediately after results, a reluctance to provide earnings outlook forecasts, and a focus on AI.
The federal Coalition is back together again. Liberals Leader Sussan Ley and Nationals Leader David Littleproud have done a deal which involves all the Nats sitting on the back bench until March 1, before rejoining shadow cabinet.
Reserve Bank Governor Michele Bullock was before the House of Representatives standing committee on economics on Friday saying she thought federal government spending added to inflationary pressures. She also added she was not happy with the current inflation rate.
The start of the 2026 auction season has been surprisingly strong, with the preliminary clearance rate rebounding from the low 60 per cent range in mid-December to this week's result of 73.7 per cent.
Four of the biggest US technology companies together have forecast capital expenditures that will reach about $US650 billion – that’s not far off $1 trillion Aussie dollars - in 2026. And depending on the story they told investors, they’ve either surged, as in the case of Meta, or tumbled, as in Microsoft’s case. The spend is being compared to the creation of the railway across the US in the 19th century.
This may well be a real version of fake news, and it probably is. But it is also somewhat true. Anti-doping chiefs at the Winter Olympics are ready to investigate suggestions that ski-jumpers are gaining a performance advantage by enlarging their penises.
Fear-o-meter
Day traders beware. Moves of ten per cent plus in large caps in a single session are likely this profit season, if the past two are anything to go by.
High frequency trading, passive money and other exotic investment options mean the moves in prices in the minutes and hours after profit reports can be reversed or exaggerated within days.
In recent reporting seasons, Woolworths, CSL and Reece Plumbing have felt the wrath of investors not happy with earnings misses. It has already started. On Friday REA dropped 8pc on its results, and the result was only a one per cent miss. Earlier in the week, Credit Corp lost 17 per cent on its results.
Strap in. The next few weeks will be fun. Wednesday is when things really kick off, with Commonwealth Bank, AGL and James Hardie all reporting, followed by IAG, Northern Star and South32 on Thursday and Cochlear on Friday.
Fear & Greed Q+A today
On the week ahead for the economy, including lending data and housing spending:
“These household spending numbers are for the month of December, and they’re really important. The governor made it very clear in her press conference after the rate hike, and again in the Statement on Monetary Policy, that household spending had been stronger than the Reserve Bank had assumed. That data only went through to November, so they were already aware there may have been some pull-forward spending from Black Friday and early Christmas sales.
That’s why December is so interesting. If we get a result that’s even modestly positive — say plus 0.5 per cent — that’s still strong, because the prior two months were 1.4 per cent and 1 per cent, which is very strong on a monthly basis. The only way you’d conclude that this was just a one-off seasonal boost would be if December came in flat or even slightly negative.
Forecasting this is very hard because seasonal spending patterns have changed, but this data is absolutely critical — and it was clearly one of the reasons the RBA cited for hiking rates last week.”
