Is the Reserve Bank's glass about to become half-empty?
http://www.abc.net.au/news/2019-02-03/should-the-rba-get-out-its-worry-beads/10770154Citi strategist Tony Brennan says the reporting season could be a tough one for investors.
"While analysts have been downgrading their earnings forecasts across a number of sectors, so far their depth has not been that great," Mr Brennan said.
"The declines in financial markets and commodity prices will be being factored into analysts' forecasts, but the apparent further slowing in the housing market and weaker business conditions domestically seem less likely to be fully taken account of."
Earnings-per-share growth across the market had been pencilled in at 7 per cent after the August reporting season. It is now closer to 4 per cent and falling.
Mr Brennan forecast nasty surprises would outnumber the pleasant ones in coming weeks.
"Overall, Citi company analysts seem to give an impression of mixed conditions, challenging for sectors like banks, diversified financials, telecoms, and discretionary retailing, but more encouraging in insurance, engineering, and grocery retailing, while reasonable for resources, building materials, REITs [property trusts]," he said.
As usual it is not a frantic start to the season.
This week around 15 big companies are reporting, mainly half-year results including James Hardie (Tuesday), CBA and IAG (Wednesday), Mirvac and AGL (Thursday) and Newscorp and REA (Friday).
Mr Mott remains "neutral" in his view on CBA as an investment proposition and cautious about the sector in general.
"The outlook for the banks is very challenging and is likely to deteriorate further as the housing market falls sharply," Mr Mott said.
