ASX faces volatility with CBA results and RBA interest rate call

The sharemarket’s near record highs will be tested in what’s shaping up to be another volatile week for investors with eyes on CBA’s half-year results.

All eyes will be on Commonwealth Bank, led by Matt Comyn, as a bellwether for the banking sector and broader economy.

The Australian sharemarket’s near record highs will be tested this week in what’s shaping up to be another volatile period for investors as they get a clearer picture on whether an uptick in consumer spending, slowing inflation and hopes for lower interest rates can deliver long-anticipated earnings growth across corporate Australia.

Half-year reporting season will ramp up this week, with all eyes on Commonwealth Bank – a bellwether for the banking sector and broader economy – when it hands down its half-year results on Wednesday, while JB Hi-Fi and Breville will issue their interim results earlier in the week, providing an insight into the strength of consumer confidence and spending. Treasury Wine Estates will release its half-year results on Thursday, when management is likely to be probed about the potential fallout from the simmering trade war between the US and China.

While the broader market is expected to post flat or modestly higher earnings, a miss to expectations threatens to tip companies off their high valuations.

Argo Investments managing director Jason Beddow said the sharemarket was in for a wild ride, with those stretched valuations likely to come under pressure on any signs of underperformance.

“I think the consumer stocks, particularly the good ones like your JB-HiFis and Bunnings probably have a really good result … and the same for Kmart – they’re pretty solid,” he said.

“I do think that health is going to struggle – the health companies that rely on the government for funding or the revenue line are still struggling, because there’s either no indexation, say for pathology, or limited revenue increases and costs are up.

“But if you’ve got pricing power and you can push price through, which a lot of good industrials even have, your results are probably OK.

“With that macro overlay of the uncertainty of what’s coming out of the US, and the market having had a lot of PE (price-to-earnings) expansion – if the earnings jump through, it probably hangs on to it, but if you disappoint you’re probably going to get a pretty severe reaction I would think.”

While there is significant risk to the downside, investors have also shown signs they are willing to reward companies that exceed expectations.

Shares in furniture chain Nick Scali surged by 10 per cent to an all-time high of $18 on Friday, after its half-year profit beat market expectations by 15 per cent.

On the same day shares in Domino’s Pizza rose by 21 per cent after new chief executive Mark van Dyck announced sweeping cost-cutting measures, including the closure of 205 loss-making stores.

Other retailers are expected to report a strong first-half performance this week due to higher household spending and hopes that interest rate cuts later this year will further boost spending.

However, in a note to clients Bell Potter analyst Rob Crookston said recent trading updates from discretionary retailers including Premier Investments, Kogan and Accent Group had been weaker than expected, and the market may be “overly optimistic about future performance”. “Guidance and trading updates will be key to determining share price movements as the market seeks reassurance that the consumer remains resilient in the face of cost of living pressures,” he said.

“We do remain positive on the consumer, especially with rate cuts due imminently, but prefer quality names like JB Hi-Fi going into these 1H25 results. Additional commentary around themes such as FX impact on cost, geopolitical events (such as tariffs) and consumer resilience are all key watches for us.”

US President Donald Trump’s tariffs on three of its key trade partners, and China’s retaliatory tariffs, loom as a key theme this week, in addition to the lower Australian dollar and the expectation of an interest rate cut next week.

AMP Capital chief economist Shane Oliver said exporters and Australian companies with operations in the US, China, Canada and Mexico would be questioned about the impact of the global trade uncertainty.

“They’ll be asked about it on post-result earning calls with analysts,” he said. “I suspect we will see more announcements from companies in terms of whether they will be impacted or not. But the problem on that front is that the tariff announcements haven’t finished yet, there’s probably more to go.

“So that’s an ongoing risk, but I suspect there are still some companies out there which are still working through the implications, and we might get some updates on that this results season.”

The Australian sharemarket is expected to open lower on Monday after Wall Street stocks slumped on Friday as investors gird for fresh US tariffs and as employment and other data fanned inflation fears.

The Dow Jones Industrial Average slid 1 per cent to 44,303.40, as did the S&P 500 Index to 6025.99. The gloomy showing came after Mr Trump said he could announce “reciprocal tariffs”, without specifying which countries might be affected.

Originally published as ASX faces volatility with CBA results and RBA interest rate call