Dividends to dominate earnings; house price slump; Mag 7 tech stocks find friends

Dividends to dominate earnings; house price slump; Mag 7 tech stocks find friends

News in brief

The downturn in the Sydney and Melbourne property markets has gone nationwide, with Darwin the only capital city not to experience either a flat property market, or price declines.

 

The local sharemarket is expected to open higher today, continuing its strong run during the month of July, where it ended 2.3 per cent higher. Helping things is a buoyant Wall St over the weekend.

 

Telstra has switched on satellite access to a small group of smartphone apps, for users in remote parts of Australia where the telco’s mobile network does not reach.

 

Australian wine exports fell 7 per cent in value to $2.3 billion last financial year, with the total volume sold the lowest since 2004. Sales to our three biggest export markets, the UK, US and China all fell, according to Wine Australia. Worldwide wine consumption has fallen to its lowest level since 1961.

 

Gianni Infantino’s future as president of football’s governing body is in serious doubt after he pulled the plug on a divisive plan to spin out a new commercial entity from FIFA and sell a stake to investors.

Fear-o-meter

IG Market Analyst Tony Sycamore

 

The August reporting season looks set to be one of the more important in recent years. Geopolitical risks remain elevated and the domestic policy backdrop has shifted meaningfully since February, with three rate rises from the RBA already delivered, a fourth still possible, and budget measures filtering through.

 

Despite those changes, the market is still looking for around 13 per cent earnings growth this financial year. Some top-down forecasts are more cautious and point to something closer to mid-single digits, with the biggest pressure likely to fall on domestic-facing parts of the market – the banks, housing-related stocks and consumer-facing names.

 

One notable issue heading into the season… is that many of the earnings estimates are outdated, particularly in real estate, technology and healthcare. Resource stocks offer more transparency and timeliness due to their regular quarterly updates.

 

The focus of the August reporting season will centre on the quantity and quality of earnings and dividends, together with forward guidance. Key questions include:

• What does the decline in consumer confidence and housing prices – stemming from the Budget and the renewed potential for RBA rate hikes – mean for consumer spending and profit margins?
• How will the softening in the housing market affect the quality of bank asset books and lending?
• How big an impact will supply disruptions and rising labour costs have on margins?
• How significantly will volatility and swings in commodity prices affect guidance and mining companies' ability to pay dividends?

Fear & Greed Q+A today

On the week ahead for the economy, including household spending figures:

 

“The trend in household spending is slowing a bit if we exclude petrol, but it's still quite resilient. We're still spending money. Some of that's on essentials—your rent, your food, your groceries, your public transport fares, your insurance—things you've got to pay whether you like it or not.

 

But the really interesting story is that older Australians who own their homes outright and have money sitting in term deposits are actually celebrating high interest rates because they're earning more on their savings. Their houses are still worth a fortune, even if they've come off a little bit recently, and they're helping underpin spending. It's the young people with mortgages who are under huge financial pressure. It's the older cohort that's hanging in there okay.”

Earnings season kicks off this week, and it will be a test of domestic resilience in the face of higher interest rates and geopolitical uncertainty. While some sectors – notably resources – are expected to report meaningful growth, others such as financials and consumer stocks, may not.

 

In the past two reporting seasons – August last year and February this year – there has been sharp volatility in share prices immediately after results. Analysts said disappointing results could well trigger sell-offs once again.

 

There are a few X-factors this time around, apart from interest rates. What’s going on in the Middle east and with oil prices is one. Another is the change to capital gains tax rules. There is already a shift in investor focus from capital growth to dividend stocks. Dividend guidance this year will take on a new importance.

 

Another X-factor is what’s happening in AI. There is surging capital spending in data centres, as well as public and energy infrastructure.

Greed-o-meter

Rank	Name	Market Cap USD	% change Friday
1	NVIDIA	4.862T	+2.93%
2	Apple	4.537T	-7.35%
3	Alphabet (Google)	4.361T	+6.88%
4	Microsoft	3.450T	+3.02%
5	Amazon	2.921T	+15.32%
6	Broadcom	1.852T	+0.37%
7	SpaceX	1.427T	-3.41%
8	Meta Platforms (Facebook)	1.418T	+3.28%
9	Tesla	1.229T	+0.76%
10	Berkshire Hathaway	1.103T	+0.36%

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The big tech stocks had a wild ride last week. Huge share price moves saw market caps shift by hundreds of billions of dollars - and on Friday, NVIDIA reclaimed the title of Wall Street's biggest company from Apple.

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Source: Companiesmarketcap.com

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