Jessica Amir
Market Strategist
Summary: The US dollar could move higher again if US durable goods orders for January are hotter than expected. Why the Australian dollar could be pressured with this weeks GDP and CPI data. And why China’s PMI release is so important this week. Energy companies are a focus this week, with outlooks from Occidental, Woodside Energy and Canadian Natural Resources on watch. Brewers will be interesting to watch amid the reopening trade. Budweiser Brewing Co in Hong Kong could surprise the market, while the world’s largest brewer Anheuser-Busch InBev listed in NY could gain more attention after options volume rose over 8% last week.
Welcome to Saxo’s Weekly watch - Covering the economic and company news, you need to be across in the new week; so you can stay on top of your trading and investing.
Please note days mentioned are in AEST time.
On Tuesday - traders will be watching US durable goods orders for January. This is a closely watched proxy for business spending – tracking purchases of long-lasting goods, such as vehicles. We know, in December durable goods orders rose 5.6% - marking its biggest gain since 2020. The hot print was driven by transportation equipment orders rising 17%. But somehow now Bloomberg consensus expects durable goods orders to have fallen 3.9%. But we think traders should stay on their toes. We are not sure if orders will fall- or even by that much. Why? Well business activity picked up in February, according surveys of manufacturers and service providers. So you might see the US dollar swing higher, if the data is hotter than expected - as the Fed would have more power to keep hiking rates. Also note the US dollar is continuing to march higher after hotter than expected US inflation read outs from consumer and producer inflation (PCE, PPI, CPI).
On Wednesday Australian GDP will likely to show fourth-quarter economic growth slowed down to pace of 2.7% YoY - quashed by higher inflation and interest rates. And monthly CPI should show inflation is cooling. In these instances, that would theoretically pressure the Aussie dollar lower, while the US dollar is continuing to move up -so that’s something to watch for the AUDUSD pair for example.
Also Wednesday - China’s PMI surveys are expected to show the recovery is progressing in February. We expect good news - with the services sector driving growth and manufacturing picking up slightly. These will be important signals - as monthly activity data won’t next be available until mid-March.
Energy companies have again reported the best earnings growth this US and Australian corporate reporting season - with increased profits and dividends. Occidental Petroleum’s outlook will be a focus this week, as well as Canadian Natural Resources results later in the week. And Woodside Energy reported early in Australia on Monday. The key is to watch their outlooks.
Occidental is expected to report its highest-ever fourth-quarter net income, with the US energy giant to benefit from high energy prices amid tight supplies. The oil and gas giant generated about $2.8 billion in free cash flow in the period after years of austerity and debt reduction, according to Bloomberg consensus. Investors will closely monitor its 2023 spending and capital-returns outlook with adjusted EPS of $1.79 expected. Occidental's shares are down 6.6% this year.
Australia’s oil and gas giant - Woodside Energy reported profits that more than trebled in 2022 - with bottom line profits up 228% - fuelled by the oil and gas price rallies, but also as it acquired BHP’s oil and gas business. Woodside reported a larger final dividend of US$1.44 a share, up from US$1.05 a share at the same time last year. Its full year pay-out stands at US$4.8 billion thanks to cash flows surging. This sets the tone for energy companies in 2023. Keep in mind at Saxo, we expect the oil price to stay around $80 this quarter and move up to $90 next quarter.
Brewers will be interesting to watch - amid the reopening trade. Budweiser Brewing Co (1876 HK) which is the distributor is Asia - is due to release results on Wednesday. The FIFA World Cup could have boosted its Q4 revenue – especially as that’s generally its weakest season of the year. Still Bloomberg consensus estimates Q4 net income will dive 75%, as the Covid infection waves in China impacted business. As for its future – some parts of Asia are rising beer tax – so that may deter some beer drinkers . In its outlook - price hikes will likely be a theme, with South Korea raising the tax on beer by 3.6% per litre in April and Budweiser APAC’s brands Oriental Brewery and Hite Jinro likely to raise their prices after the proposed liquor tax hike.The world’s largest brewer Anheuser-Busch InBev SA/NV (BUD) may gain more attention when it reports on Thursday. This is the distributor behind Aguila, Becks, Corona, Modelo and Stella Artois. Option volume in Anheuser-Busch InBev rose about 8% in the week before their due to release earnings. Bloomberg consensus its EPS to grow from 1.94 to 3.01
For more - head to analysis.saxo to stay abreast of our daily analysis on company and economic news.
For equity inspiration - check out our Equity Theme Baskets – also note Defence stocks are outperforming year-on-year.
Note: This reported was prepared on Friday, Feb 24 and updated Monday Feb 27.
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As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
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