ASX to fall; BHP, Coles, Stockland, Tabcorp to report

Wall Street is closed for Presidents’ Day. Trading will resume on Tuesday.

European shares inched higher on Monday, with sustained gains in miners. The pan-European STOXX 600 index closed 0.1 per cent higher ahead of a slew of economic data due later this week.

The basic resources index climbed 2.4 per cent.

Today’s agenda

Local: NZ fourth quarter PPI at 8.45am AEDT; RBA meeting minutes at 11.30am AEDT

Overseas data: Manufacturing/Services PMIs for February for Japan, Eurozone, UK and the US; US January existing home sales

Other top stories

Super war looms on tax, nation building Ex banker David Murray says it was “not the place of the government” to direct how people’s savings should be invested after Labor launched its definition of super.

What we learnt: Bendigo joins banking’s Game of Thrones Bendigo Bank war-games the profit versus growth conundrum, why NIB’s profit drop is a good thing, and Reliance Worldwide thinks small.

Market highlights

ASX futures down 27 points or 0.37% to 7254 near 7am AEDT

• AUD +0.5% to 69.13 US cents
• Bitcoin +1.7% to $US24,877 near 7am AEDT
• Wall St closed for Presidents’ Day
• Stoxx 50 -0.1% FTSE +0.1% CAC -0.2% DAX -0.03%
• Spot gold -0.1% to $US1841.45 an ounce at 1.56pm New York time
• Brent crude +1.3% to $US84.07 a barrel
• Iron ore +1.8% to $US128.75 a tonne
• 10-year yield: US 3.81% Australia 3.81% Germany 2.45%

Reporting season so far: UBS’ view

In a note, UBS said at the midway point, there are “signs of earnings exhaustion”.

“Earnings beats are still outnumbering misses (just), while analysts have consistently been cutting their forward earnings estimates. The downward skew to revisions is clearly observable for both FY23 and FY24, and reflects an analyst community that sees an economy past its peak and signs of earnings exhaustion.”

That translates into tough times ahead: “Echoing our concerns that recent earnings may have peaked have been numerous companies that missed on 1H earnings, but failed to commensurately adjust down FY guidance.

“For these companies the bar they have now set for 2H earnings looks challenging in light of a domestic economy which is already losing momentum, and has significant challenges over the coming six months via: 1) further RBA hikes, and 2) a record amount of fixed rate mortgages to be repriced upwards.”

United States

Market strategist BCA Research: “We believe the equity rally remains intact and still see the S&P 500 peaking in the mid-4000s before eventually revisiting last year’s lows. We continue to recommend a near-term equity overweight and expect to pursue neutral positioning for a few months before turning fully defensive sometime in the fall.

BCA said it plans to downgrade equities to neutral and upgrade fixed income to neutral once the index reaches 4000. “Once equities have met our target, we will be looking for an opportunity to underweight them, ahead of a decline to the mid-to-high 3000s.”

United Airlines said it will introduce a seating policy that would make it easier for adults to book adjoining seats for children under 12 without charges after President Joe Biden vowed to outlaw such fees in his State of the Union address this month.

Chinese equities to rally 20pc: Goldman

Strategists at the Wall Street firm are optimistic: “We are still looking for about 20% price returns from Chinese stocks over the next 12 months, but we believe the principal theme in the stock market will gradually shift from reopening to recovery, with the driver of the potential gains likely rotating from multiple expansion to earnings growth/delivery, reminiscent of a transition from the Hope to Growth phase in a typical equity cycle.”

More specifically, Goldman said it lifted its EPS growth forecast for MSCI China twice since last November to model for the faster-than-expected reopening progress and potentially less earnings drag from the housing supply chain.

“Our current EPS growth expectation stands at 17%, 3pp higher than consensus, putting China as one of the fastest growing markets in the region this year. Earnings revisions have stabilised at the market level, but upgrades are still absent except for the TMT sector where estimates have likely bottomed in mid-2022, mostly led by improving profitability assumptions as opposed to a better revenue outlook.”

Original Source