The ASX is staring at a strong negative open this morning on the back of a brutal sell-off in US markets on Friday evening, with tech stocks punished. The catalyst for the sell-off was a series of disappointing results from mega-tech names on the Nasdaq, but attention will quickly shift to central bank activity over the coming days.
Economic calendar and news
With last week’s official inflation reading coming in significantly ahead of expectations, all eyes will be trained squarely on the Reserve Bank of Australia on Tuesday as the central bank faces a predicament on whether to lift interest rates for the first time in over a decade.
A growing number of economists, as well as three of the Big Four banks expect the RBA will increase the official cash rate by 15 basis points, which would officially kick off the rate hike cycle.
However, there are still a large number of observers, including Commonwealth Bank, that believe the RBA will wait for data on wages growth, due later this month, before lifting rates from June. The RBA has previously indicated wages growth data will be integral before raising rates, but accelerating inflation may force a change of tack. If the cash rate is increased, it would also be the first time since 2007 that the RBA has raised rates during an election campaign.
Nonetheless, whatever the outcome, the central bank will provide a forecast on current economic conditions, both domestic and international, when it releases its quarterly Statement on Monetary Policy on Friday.
There are plenty of other data-points this week, including job advertisements, home loans, preliminary retail sales for March, and the Balance of Trade, but all will pale in comparison with the RBA meeting.
If that’s not enough for investors to contend with, the Federal Reserve also meets this week to evaluate monetary policy. The consensus forecast suggests the world’s most-watched central bank may increase interest rates by as much as 50 basis points, a significant tightening in monetary policy.
However, last week’s shock contraction in the US economy, with US GDP slowing 1.4% during the first quarter of the year, may represent a wildcard for policy-makers to deal with.
US employment data will also trickle through this week, with expectations suggesting up to 400,000 jobs were added to the economy in April, which may be enough for the unemployment rate to ease to 3.5%.
Stocks on watch
After a huge drop on Friday, Amazon (NASDAQ: AMZN) will be one of the leading stocks in focus throughout the week. With revenue growth slowing significantly amid the current macroeconomic landscape, Amazon posted its first quarterly loss in seven years, and also pointed to a further slowdown ahead. The result was also attributable to a monster loss on its position in EV-maker Rivian (NASDAQ: RIVN), all of which was enough to unsettle a number of investors.
Shares in Apple (NASDAQ: AAPL) also slid into the close last week, ultimately proving a major headwind for the Nasdaq index. While the iPhone maker’s results were relatively robust, shareholders were concerned around the supply chain outlook for the company, and the impact of ongoing lockdowns in China, both of which could prove a major drag on iPhone and other hardware sales.
Sticking with the US, the week ahead sees earnings releases from a number of other high-profile stocks including pharmaceutical giants Pfizer (NYSE: PFE) and Moderna (NASDAQ: MRNA), as well as peer-economy service operators like Airbnb (NASDAQ: ABNB) and Uber (NYSE: UBER). Semiconductor firm Advanced Micro Devices (NASDAQ: AMD) is another large-cap stock set to hand down earnings, and it comes at a time where momentum has turned against the microchip sector amid slowing demand for consumer electronic goods.
Warren Buffett used his annual Berkshire Hathaway (NYSE: BRK.B) meeting over the weekend to talk up the prospects of cash, despite his company deploying over US$50 billion into shares of various companies throughout the first quarter, a major shift from the last two years.
One of Berkshire’s biggest moves was to increase its exposure to oil titan Chevron (NYSE: CVX). In the meantime, however, Buffett also provided reassurances on BRK’s first-quarter operating profit, which was relatively flat despite supply chain chaos and other macro factors. The Oracle of Omaha also survived a shareholder vote that sought to replace him as Berkshire Chair.
There are also ASX earnings to watch out for courtesy of three of the local market’s biggest names, ANZ (ASX: ANZ), NAB (ASX: NAB) and Macquarie Group (ASX: MQG). ANZ and NAB will deliver half-year updates this week, on Wednesday and Thursday respectively, while Macquarie will release its full-year earnings on Friday. If the RBA does lift rates tomorrow, it could provide the nation’s leading banks with another variable to consider as they weigh up the impact of inflation, economic growth, and what it means for their loan books.
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