Josh Gilbert, market analyst at eToro, shares his three things to watch in Australia in the coming days.
1. RBA Rate Decision - Tuesday
Melbourne Cup day often involves photo finishes but markets will see another close call on Tuesday when the RBA meets.
After the trifecta of sticky underlying inflation, hotter-than-expected retail sales and unemployment remaining near record lows, there’s a strong chance the RBA will hike rates again when it meets on cup day.
Markets are backing a 53% chance the Reserve Bank will raise rates by 25bps. At this point, a hike before year-end seems pretty much nailed on, so the question is now whether we see more than one hike.
Elsewhere, Central Banks like the Federal Reserve are winding down their tightening cycles, leaving Australia the odd one out – something that hasn’t escaped the attention of International Monetary Fund economists currently visiting Australia.
The global financial body has added to the pressure for the RBA to hike but not without also pointing the finger at state and Federal governments, insisting more needs to be done on a policy level to complement the impact of rate hikes.
2. Chinese Inflation - Thursday
Thursday sees China’s monthly consumer price index reading, which is predicted to come in lower than forecast following three months of low readings.
China's struggling economy has likely bottomed out – and while better news may be on the horizon, PMI data this week showed that it will be a rocky road to recovery.
Recent policy support in the form of additional sovereign debt and raising the budget deficit ratio is a step in the right direction, but it’s not a quick fix and will take time to pay off.
With the positive impact of policy stimulus, a broad increase in demand will take time to build momentum, meaning inflation will continue to hover near 'deflation territory'. Expectations for next week's reading are for an increase to 0.2%.
3. Xero Half-Year Results - Thursday
In 2023, Xero lifted its subscriber count by 14% to 3.74 million. However, its net loss widened for the year, disappointing some investors. Against a difficult backdrop and mounting investor pressure, new CEO Sukhinder Singh Cassidy has promised to drive operational efficiency to help grow profitability for the NZ-based powerhouse.
Given Cassidy’s commitment, expectations will be high heading into Xero's H1 results this Thursday. There will be little margin for error as well, given shares have climbed by 58% in 2023, and investors will be expecting additional decent returns.
These earnings will be the first for the company without the involvement of founder and former CEO Rob Drury. Drury retired from the board after the company’s annual meeting in August, closing out close to two decades with the company.
Despite this, Drury has committed to continuing to support Cassidy and with Xero's subscriber base still growing across the globe, the future looks bright for Xero.