With global markets on pause waiting for __news about tax cuts in the US and the wobbly world of European politics, the busiest week of the domestic reporting season will capture most of the attention in coming days.
Futures trading over the weekend points to a pretty flat opening on the ASX, following a "going nowhere" sort of end to the week in the US and Europe.
Markets on Friday's close
- ASX SPI 200 futures +0.1pc at 5,760
- AUD: 76.69 US cents, 72.23 euro cents, 61.76 British pence, 86.59 Japanese yen, $NZ1.07
- US: Dow Jones flat at 20,624 S&P500 +0.2pc at 2,351 NASDAQ +0.4pc at 5,325
- Europe: FTSE +0.3pc at 7,300 DAX flat at 11,757 Eurostoxx50 -0.1 at 3,309
- Commodities: Brent oil +0.3pc at $US55.81/barrel, Gold -0.3pc at $US1,235/ounce, Iron ore (Nymex) +0.8pc at $US87.35/tonne
'Trump trade' still in vogue
However, over the last week the "Trump trade" was still in vogue with US and Australian shares up 1.5 per cent, and Europe not too far behind.
The sample size of the February reporting season has reached some sort of critical mass, so a few conclusions can be drawn — basically things are solid and straight-out disasters have been rare.
"We are now just over halfway through reporting season — 58 per cent by market capitalisation — and so far, it feels pretty comfortable to me," director on Citi's equities desk Karen Jorritsma said.
Ms Jorritsma noted a lot of tidying up of earnings expectations had already been done during the AGM season last year and the confessions season leading into results, so there have been few big surprises tabled.
"So far, 51 per cent of results at the EPS (earnings per share) line have come in as expected, with the remaining positive versus negative surprises pretty evenly skewed — 23 per cent versus 26 per cent respectively," she said.
Another big theme of the past couple of weeks, the rebound in resources businesses, will again feature this week with the likes of BHP Billiton, Fortescue Metals Group and Woodside Petroleum all reporting.
Ms Jorritsma said many brokers were now just catching up with the impact higher prices are having on earnings.
"Balance sheets are back in force, with a lot of miners being cashed-up again," she said.
"S32 (the BHP spin-off) had a really good result, but it was sold down on the day because investors were disappointed the cash wasn't returned to them."
This time last year, BHP Billiton (Tuesday) posted a $US5.7 billion ($7.8 billion) loss, things in China looked crook — dragging commodity prices down — and the so-called resources super-cycle seemed on its last legs.
This result will not have the massive $US6.9 billion ($9 billion) of impairments from US shale gas and Samarco dam disaster dragging it down, so that is a positive start.
Underlying profit is tipped to be around $US3.6 billion ($4.7 billion).
Having gone through the pain of ditching the unsustainable policy of never cutting dividends, BHP probably will not be shovelling what will be a huge pile of cash back to shareholders, but a forecast 42 US cents a share (55 cents) will be more appreciated than last year's paltry 16 US cents (21 cents) effort.
How big will Fortescue's profit be?
Fortescue Metals Group (Wednesday) has enjoyed a stellar six months.
It has chiselled costs down to the levels of its bigger neighbours, prices have soared, debt has been slashed and fears about disgruntled bondholders going to the "nuclear" option have evaporated.
As a result, its share price is up 230 per cent compared to this time last year.
The key questions now are: How big will the profit be? And how much will investors get of it?
The market is expecting underlying profit will triple to around $US530 million ($690 million) and the interim dividend should be up around 33 per cent.
Unlike their coal seam gas rivals shipping gas out of Queensland, Woodside Petroleum (Wednesday) and PNG-focused Oil Search (Tuesday) are unlikely to be walloped by massive project impairment charges.
Macquarie is tipping Woodside's underlying half-year profit will be a bit above $US900 million ($1.2 billion) — about 35 per cent higher than last year — while the interim dividend is likely to cut by around 15 per cent.
Macquarie's forecast for Oil Search is less bullish than most brokers', pencilling in full-year underlying earnings of $US95 million ($123 million) — well down from the $US360 million ($470 million) of 2015.
However, Oil Search's headline net profit of $US165 million ($215 million) is likely to look a lot better than its previous $US39 million loss ($50 million).
Woolworths's (Wednesday) big local rival Wesfarmers delivered a solid first half result last week — although it was largely held up by coal — while the Coles supermarket business struggled as it fought a margin-crunching discount war for market share.
That is likely to be a big theme of Woolworths's numbers.
Despite a mountainous $59 billion-worth of sales in just six months, they are still likely to be characterised as "flat".
Net income will probably fall, also hit by the discount battle and ongoing problems in the Big W chain.
However, the headlines should be OK, with net profit forecast to be around $1.4 billion — a $2.7 billion turnaround from the previous Masters-devastated loss.
The other interesting results of the week are likely to include Bluescope Steel (Monday), which, these days, has switched from profit downgrades to upgrades and Qantas (Thursday), which may be levelling-off after regaining altitude in the past couple of years.
Crown Resorts (Thursday) will also grab its fair share of attention.
The issue will not be so much about money — although it is unlikely to be a great profit — as the diabolical problems it has in China where 18 staff, including three Australian executives, are still languishing in jail for "gambling-related crimes".
Business investment and wages to remain weak
Locally, there is a release of important quarterly data on business investment and construction work — the so-called "partials" that feed into the next GDP figure, which comes out in two weeks.
Business investment — or capex — has been so bad, for so long that it seems to have lost its shock value.
Private capital expenditure for the December quarter (Thursday) is again expected to fall, this time by around 3 per cent, as the impact of the winding-up of the big LNG projects continue to drag things down.
Given how glum things are looking backwards, there is more interest in the forward-looking investment "intentions" survey.
Sadly, this is not likely to be great either, as the spurt in commodity prices will not have been enough to get a host of mining projects out of mothballs just yet.
Construction work (Wednesday) will bounce back, primarily because the water-logged third quarter number was so weak.
The forecast is for a 1.5 per cent rise — not great, not awful.
Talking of awful, the wage price index (Wednesday) has been plumbing the depths for a while, and the December quarter could deliver a new record low in growth of just 1.8 per cent over the year, further strangling household income and spending.
It is also a busy week for the Reserve Bank, with the minutes of the February meeting out (Monday), Governor Philip Lowe speaking (Tuesday) and Dr Lowe then heading down to Canberra (Friday) for his bi-annual grilling in the House of Representatives Standing Committee on Economics.
At the end of the week, we will be back where we started, with official interest rates firmly on hold for some time to come.
Globally, there is not much top shelf stuff to drop, although the minutes from the Federal Reserve's last interest rates meeting (Wednesday) may be worth a cursory glance.
| Australia | ||
|---|---|---|
| Monday 20/2/17 | ||
| Tuesday 21/2/17 | RBA minutes | Nothing exciting here, RBA is firmly on "hold" |
| Wednesday 22/2/17 | Wage price index | Q4: Wage growth at a record low |
| Construction work | Q4: Q3 was weather affected, this should bounce | |
| RBA speech | Governor Philip Lowe speaks | |
| Thursday 23/2/17 | Business investment | Q4: Has been weak for ages, investment & capex intentions will be of most interest |
| Friday 24/2/17 | RBA testimony | Governor Lowe's parliamentary testimony |
| Corporate | ||
|---|---|---|
| Monday 20/2/17 | Bluescope Steel | Interim core profit forecast $330m |
| Brambles | Interim core profit forecast $300m | |
| Worley Parsons | Interim core profit forecast $50m | |
| Tuesday 21/2/17 | BHP Billiton | Interim core profit forecast $US2,820m |
| Caltex | Interim core profit forecast $525m | |
| Oil Search | FY core profit forecast $US110m | |
| Wednesday 22/2/17 | Fortescue | Interim core profit forecast $US1,025m |
| Woodside Petroleum | Interim core profit forecast $US940m | |
| Woolworths | Interim core profit forecast $880 | |
| Thursday 23/2/17 | Crown Resorts | Interim core profit forecast $300m |
| Qantas | Interim core profit forecast $610m | |
| Ramsay Health Care | Interim core profit forecast $260m | |
| Westfield Corp | FY core profit forecast $US700m | |
| Friday 24/2/17 | Super Retail Group | Interim core profit forecast $70m |
| Overseas | ||
|---|---|---|
| Monday 20/2/17 | US Presidents' Day | National day off celebrating the first one, George Washington |
| EU: Consumer confidence | Feb: Pessimism outweighs optimism | |
| Tuesday 21/2/17 | US, EU: PMIs | Feb: Factories still expanding activity |
| Wednesday 22/2/17 | US: FOMC minutes | May hint at a rate rise next month |
| EU: CPI | Jan: Inflation under 1pc YoY | |
| UK: GDP | Q4: Growing around 2.2pc YoY | |
| Thursday 23/2/17 | US: House price index | Dec: Modest growth |
| Friday 24/2/17 | US: New home sales | Jan: Should rebound after previous fall |
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