ASX 200 tipped for weak start as earnings season kicks up a gear

The Australian sharemarket is expected to open lower on Monday despite mixed overseas leads, as earnings season cranks up.

The Australian sharemarket is expected to start the week in the red. Picture: AAP

The Australian sharemarket is set to start the week in negative territory following mixed overseas leads, with investors looking to square off positions before the earnings season kicks into higher gear.

SPI futures are pointing to a 0.6 per cent decline at the open despite expectations that energy and materials stocks will rise through the session.

“There’s enough in terms of what’s happened in the commodities markets to be able to support the energy and materials sectors,” said CommSec chief economist Craig James.

“But there will also be some caution moving into the week and some fairly volatile times ahead as investors sort out in their own minds what’s going to happen with interest rates and just how aggressive the Reserve Bank will be.”

Oil prices topped $US90 a barrel for the first time in eight years last week on the supply outlook after OPEC+ said it would continue to add 400,000 additional barrels of oil per day into the global market.

Brent jumped 2.4 per cent to $US93.27 a barrel on Friday, while WTI crude rose 2.3 per cent to $US92.31.

“Those price rises should support the energy sector,” Mr James said. “We also saw the gold price up a smidgen as well, and iron ore producers should get a degree of support from the iron ore price rising to $US146.60 a tonne.”

Financials could also get a boost from the rate outlook.

Looking further ahead, Mr James sees elements of the technology sector coming under further pressure as investors gauge the winners and losers from the post-Covid, higher interest rate environment.

Overseas, tech stocks have seen dramatic moves in recent days: Facebook’s stock plunged 26 per cent last Thursday in Wall Street’s biggest one-day drop, while Amazon tumbled 8 per cent on Thursday before surging 13 per cent on Friday.

“It’s stupid moves really. There’s a lot of the seasoned veterans looking at the markets and rubbing their eyes. It just doesn’t make sense to be moving so much one day and then back the other direction the next day,” Mr James said.

On the data front this week, retail trade data and job ads figures are due on Monday, while Tuesday will see CBA release its January report on household spending intentions.

Reporting season also cranks up a gear in the coming days, with earnings due from Argo Investments, Suncorp, CBA, Megaport, AGL and AMP, among others.