29/07/10 - 15:00
Ben Potter, Research Analyst
Afternoon report from the Trading Room - 3.00pm
Across Asia, regional markets are mostly lower in line with overnight leads and ongoing scepticism about the strength and sustainability of the US recovery. While the Nikkei 225, Hang Seng and Kospi are all softer between 0.2% and 0.5%, the Shanghai Composite is once again happy to do its own thing and is currently firmer by 0.6%.
In Australia, the ASX 200 is currently 0.1% weaker at 4524 but well off its earlier lows of 4503. While the materials and consumer staples are offering small amounts of resistance, losses across the financials, consumer discretionary and energy sectors have been more than enough to keep the market underwater from the opening bell.
At the moment traders’ focus really seems to be on earnings season next week where we see a number of heavyweights coming out with results. Given the ASX 200 has been thrown about by macro factors (generally outside of our shores), the earnings season is one period where micro or bottom up events can move our market.
Given Austar has disappointed the market with poor subscriber numbers today, traders will be hoping for better things from West Australian news next week. The media sector is touted as one that could benefit nicely from strong advertising spending and strong cost reductions.
Retailers have recently seen anaemic sales growth and this will be reflected in their results with margins under pressure through heavy discounting, although there seems to be a view that Myer could surprise on the upside.
As it stands, analysts are expecting to see around 6% earnings per share growth with 20% growth in 2011. What will be of key interest is company outlook statements, as views from CEO’s on potential earnings will drive share price momentum. Looking back to the February earnings season, one thing worth remembering - companies that not only beat expectations but provided a positive outlook generally outperformed over the following 6 month period.
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