Five things to watch this week

The Australian reporting season stepped up another gear this week, dividends and cost cutting were the most important topics on the agenda. The threat of inflation is also clearly increasing, with government bond yields in both the US and Australia hitting 12-month highs. Despite this investors remain resilient and unconcerned about the risk of an impending correction, assuming central banks will step in as and when required. Here are my five things to watch for in the week ahead, and the highlights of last week.

• BNPL Frenzy – Afterpay (ASX:APT) has taken a back seat to Zip Co (ASX:Z1P) in the last few weeks, however, with both set to report first half earnings on the 26^th we will receive a real-time update on how their quest for global domination is progressing. As usual, all eyes will be on the growth in both customers and merchants in the US, rather than Australia, where the potential is significantly larger.

• Health of the economy – The main Australian economic release will be the private capital expenditure measure. This offers an important input into the quarterly economic growth reports, covering every from capital spending on buildings and structures, to equipment, plant and machinery. With many companies announcing cuts to capital expenditure in 2020 to retain cash, it will be an interesting release.

• Returning to normal – Both Qantas (ASX:QAN) and Sydney Airports will report next week, offering an insight into the health of the business and leisure sectors. Traffic volumes have been well down, with both providers complaining about the uncertainty created by border closures and snap lockdowns. After recovering strongly in recent months, it is yet to be seen how long these companies can last without a significant pick up in business travel. All eyes will be on their capacity and outlook statements.

• Apartment sector update – It has been a busy and difficult few years for the property developer and asset manager Lend Lease. With margins impacted by delays on key projects, slowing apartment sales amid lower immigration and the recent departure of their CEO. Analysts are expecting a profit of $304 million and a dividend of $0.22, however, with a portfolio of office and residential buildings some pain may still lie ahead.

• Inflation data – With all eyes on bond rates amid concerns that fiscal and monetary stimulus may be overheating the economy, this week will see the release of the US Personal Consumption Expenditure or PCE price index along with the EU CPI release. Headline rates remain quite low due to energy prices and food, however, the recovery and shortage of inventory likely means a surprise lies ahead at some stage.

Other key reports include:

• Seek Ltd (ASX:SEK) – Tuesday
• Appen (ASX:APX) – Wednesday
• Woolworths Ltd (ASX:WOW) – Wednesday

Drew Meredith

Drew is publisher of the Inside Network's mastheads and a principal adviser at Wattle Partners.