The final week of Australia’s annual reporting season is bracing for a wave of profit downgrades, as boardrooms respond to a slowing economy with conservative outlook statements. Major retailers including JB Hi-Fi, Myer, and Nick Scali have reported difficult trading, while major banks detailed a pessimistic outlook for the local property market. Investors will watch results from big supermarkets, Wesfarmers, Harvey Norman, and Qantas this week for clues on how the Reserve Bank of Australia’s rapid interest rate rises and soaring oil prices are affecting the economy.
These economic concerns have prompted analysts to cut earnings forecasts for the 2026-27 financial year by two per cent, double the typical pace, according to Goldman Sachs. The market downgrades three companies for every two it upgrades. MST Marquee senior analyst Hasan Tevfik described the season as “weak,” noting companies adopt a conservative “don’t promise much” strategy. While more companies beat projections, UBS strategist Richard Schellbach asserts this is misleading given subdued expectations. UBS warns that results from smaller businesses, including G8 Education, which operates childcare centres and manages early learning facilities, and Netwealth, a financial services company providing wealth management and investment products, could disappoint investors this week.
Globally, Wall Street saw a rebound on Friday, with the Nasdaq 100 climbing 0.3 per cent and the S&P 500 adding 0.4 per cent, despite a tumultuous week for US shares driven by concerns over government deficits and bond yields. Investor attention will also turn to Nvidia’s second-quarter results and Federal Reserve chairman Kevin Warsh’s speech at the Jackson Hole symposium on Friday for clues on the central bank’s inflation strategy. Domestically, the focus is squarely on Australia’s monthly inflation data for July, crucial for the RBA’s September cash rate decision. Markets anticipate trimmed mean inflation, the RBA’s preferred measure, to rise 0.3 per cent, potentially easing the annual rate to 3.5 per cent. Betashares chief economist David Bassanese warns a “hot CPI report” could pressure the RBA for a September hike; however, the central bank might prefer two adverse reports before acting, potentially pushing a rate rise to November.
