Aurelia Butler

(Reuters) – Earnings of Australia’s top supermarket chains are likely to show constricted spending presenting a challenging outlook for Woolworths and Coles, as consumers deal with painfully high mortgage rates and sticky inflation.Decade-high interest rates and stubborn inflation still running above the central bank’s target range has prompted consumers to be mindful of their spending, analysts warned.The results will show the impact of a protracted cost of living crisis on the companies, which ring up two-thirds of every Australian dollar spent on groceries and are closely watched as barometers of the wider economy.Consumers are becoming more discerning by trading down in items such as food by choosing lower-priced items and more at-home consumption, UBS analysts wrote in a note.Woolworths and Coles “face headwinds over the next 12 months because it’s unlikely the economic outlook will improve due to the higher rate environment,” said Kyle Rodda, senior financial market analyst at Capital.com.The softening in consumer demand should be reflected in their earnings, he added. Woolworths is set to report annual results on Aug. 28 while smaller rival Coles will report on Aug. 27. Analysts on average expect Coles to fare better.Coles has said it expects more volume growth after a surge in supermarket sales in the third quarter in contrast to Woolworths which posted weak food sales.”With cost-of-living pressures remaining a hot topic, I expect that the profit margins of the big supermarket chains will again be under the microscope,” said Tim Waterer, KCM Trade’s chief market analyst.Jefferies analysts see underlying earnings margin expansion for Coles, rebounding from a period of margin contraction in the prior year and due to benefits from initiatives to connect brands with customers.Meanwhile, Australian food underlying earnings margin for Woolworths is expected to contract due to increased business costs and supply chain investments. Net profit after tax (NPAT) from continuing operations for fiscal 2024 is expected to come in at A$1.10 billion ($737.99 million) for Coles, slightly higher than A$1.04 billion in the prior year, according to Jefferies’ estimates. However, NPAT before significant items for Woolworths is expected to decline to A$1.67 billion, from A$1.72 billion last year.Woolworths could also announce a special dividend along with its annual results, from the proceeds of its stake sale in liquor store and pub operator Endeavour Group, according to analysts.($1 = 1.4905 Australian dollars) More

JACKSON HOLE, Wyoming (Reuters) -The U.S. Federal Reserve’s dovish shift will likely give the Bank of Japan some respite in its battle to tame a weak yen, but could complicate its efforts to raise interest rates if the two central banks’ diverging policy paths keep markets jittery.At an annual symposium in Jackson Hole, Wyoming, Fed Chair Jerome Powell said on Friday “the time has come” to cut rates as rising risks to the job market left no room for further weakness, offering an explicit endorsement of an imminent policy easing.The remarks came hours after BOJ Governor Kazuo Ueda told parliament that while the BOJ will keep an eye out on the fallout from unstable markets, it will continue to hike rates if inflation remains on track to durably hit its 2% target.The yen rose against the dollar after Ueda’s remarks and extended its gains on those from Powell, as markets focused on prospects of a narrowing U.S.-Japan interest rate gap.”The yen buying today is understandable given Governor Ueda showed very little sign of a shift in the views and plans of the BOJ following the financial market turmoil earlier this month,” said Derek Halpenny, head of research global markets EMEA at MUFG, in a note to clients.The Japanese currency’s rebound comes as a relief for the BOJ, which has been under political pressure to stem its falls that hurt consumption by inflating imported food and fuel costs.But the BOJ’s rate hike path is full of uncertainty as Japan swims against the global rate-cut tide, which could leave its currency and stock prices susceptible to wild swings.Having seen market rupture after the BOJ’s July rate hike, the Japanese central bank already feels the need to tread slowly and carefully.”Markets at home and abroad remain unstable, so we will be highly vigilant to market developments for the time being,” Ueda said on Friday, adding that big market swings may affect policy decisions if they alter the board’s inflation projections.Domestic political considerations also complicate the BOJ’s rate hike path as Prime Minister Fumio Kishida, who appointed Ueda to the top BOJ post, is set to step down and pass the baton to the winner of a ruling party leadership race in September.While most leading candidates to succeed Kishida have embraced the BOJ’s plan for moderate rate hikes, it is uncertain whether the new premier will support higher borrowing costs if volatile markets weigh on corporate profits.”With so much uncertainty, the BOJ probably won’t be able to take bold steps,” said former BOJ board member Makoto Sakurai, ruling out the chance of another rate hike this year. “Until the domestic political situation stabilises, the BOJ might find it hard to raise rates,” he said.A latest poll by Reuters showed a majority of economists expect the BOJ to hike rates again this year, but more see the chance of it happening in December rather than October.FRAGILE ECONOMY A RISKThe BOJ’s surprise decision to hike rates in July and Ueda’s signal of further rate hikes jolted financial markets earlier this month, forcing his deputy to offer dovish reassurance that no hikes will be coming until markets stabilise.The key message from Ueda’s remarks in parliament on Friday was that while the BOJ will be in no rush to hike rates, the market rout won’t derail its longer-term plan to keep pushing up borrowing costs, said two sources familiar with its thinking.Big data analysis of recent BOJ commentary underscores the bank’s rate-hike stance with its bias on inflation remaining “very positive,” said Jeffrey Young, chief executive officer of DeepMacro, a U.S. fintech firm that conducts AI-driven analyses of economic indicators and policymakers’ comments.”Could we get another one by the end of the year? Well, probably. I think that’s what the model is saying,” he said on the chance of another rate hike by the BOJ.”If you have inflation and growth on the firm side, and you have BOJ rhetoric still biased to say that inflation and growth are both okay, the only thing that would really stop it from raising rates would be market fallouts.”Some analysts, however, are more cautious about the strength of Japan’s economy. While consumption rebounded in the second quarter, rising living costs have weighed on household sentiment. A U.S. slowdown could also weigh on exports.”Domestic demand is very weak,” said Sayuri Shirai, an academic at Keio University in Tokyo. “From an economic perspective, there’s little reason for the BOJ to raise rates.” More

(Reuters) – A look at the day ahead in Asian markets by Noel Randewich.Asia investors will digest the near certainty of a September loosening of U.S. monetary policy on Monday after a speech by U.S. Federal Reserve Chair Jerome Powell on Friday confirmed that the United States is ready to begin cutting interest rates.At his keynote speech to the Kansas City Fed’s annual economic conference in Jackson Hole, Wyoming, Powell said “the time has come for policy to adjust,” given that upside risks to inflation have diminished and downside risks to employment have increased. Powell’s comments lifted the yen and weakened the dollar index, with lower interest rates relative to Japanese rates making Japan’s currency more attractive.Dollar/yen hit its lowest since August 6 in late Friday trading.Geopolitical risk ratcheted higher over the weekend as Hezbollah launched hundreds of rockets and drones at Israel early on Sunday while Israel’s military said it struck Lebanon with around 100 jets to thwart a larger attack. It was one of the biggest clashes in more than 10 months of border warfare and raised the specter of Israel’s war in Gaza turning into a wider conflict.Investors will also mull the outlook for Japanese interest rates after Bank of Japan Governor Kazuo Ueda on Friday reaffirmed his resolve to raise interest rates if inflation stays on course to sustainably hit the 2% target.Ueda’s comments came as data showed Japan’s core inflation accelerated for a third straight month in July, with a slowdown in demand-driven price growth potentially complicating the central bank’s decision on further rate hikes.The Nikkei share average ended up 0.4% on Friday following Ueda’s parliamentary testimony.Having spent all year trying to put a floor under the tumbling yuan, China’s central bank is suddenly faced with the opposite problem and is turning to subtle ways to stop the currency from appreciating sharply.The usually restrained yuan has strengthened 1.3% against the dollar in August, lifted by expectations of Fed rate cuts strengthening Japan’s yen.On China’s commercial banking front, Bank of China Vice Chairman and President Liu Jin resigned on Sunday. The state-owned lender said its board had approved Chairman Ge Haijiao to serve as acting president.The U.S. political landscape offered few new signs of certainty for global investors after Vice President Kamala Harris sealed the Democratic presidential nomination with a muscular speech on Thursday, laying down broad foreign policy principles and sharp contrasts with Republican rival and former President Donald Trump.With 11 weeks left in the contest for the White House, contracts for a Harris victory are trading at 55 cents, with a potential $1 payout, on the PredictIt politics betting platform. Contracts for a win by Trump, who has suggested he would impose tariffs of 60% or higher on all Chinese goods, are at 49 cents.Tariffs were in the spotlight last week after China’s Commerce Ministry met with automakers and industry associations to discuss raising import tariffs on large-engined gasoline vehicles, sounding a warning as the European Union nears a tariff decision on Chinese electric cars. On Friday, the United States added 105 Russian and Chinese firms to a trade restriction list over their alleged support of the Russian military. Here are key developments that could provide more direction to Asian markets on Monday:- Singapore Manufacturing (July)- Japan Leading Indicator (Revised) (June) More

SYDNEY (Reuters) – Australian employees now have the right to ignore their bosses outside working hours thanks to a new law which enshrines the “right to disconnect.”Here are key facts about the law, which came into force on Monday: WHAT DOES THE LAW SAY?Employers will still be able to contact their workers, however staff will now have the right not to respond outside working hours unless that refusal is unreasonable. This means an employee can refuse to monitor, read or respond to contacts from an employer or a third party such as a client.It will be up to Australia’s industrial umpire, the Fair Work Commission (FWC), to decide whether a refusal is unreasonable or not. In doing so, it must take into account factors like the employee’s role, the reason for the contact and how it is made.WHAT ARE THE PENALTIES?Employers and employees must first try and resolve disputes at work. If that fails, the FWC can intervene.The FWC can order a company to stop contacting an employee or bar it from taking disciplinary action against workers who refuse contact, according to the Australian Industry Group.However, it can also order an employee to respond to an employer in cases where their refusal is not reasonable. Contravening such an order could result in fines of up A$19,000 ($12,764) for an employee or up to A$94,000 for a company.WHAT HAS BEEN THE RESPONSE?The law has been welcomed by unions and rights groups, who say new rights for workers are overdue. But it has drawn criticism from employer associations who say the legislation is flawed and was rushed into law. They say it could harm productivity.DO ANY OTHER COUNTRIES HAVE SIMILAR LAWS? Similar laws giving employees a right to switch off their devices are already in place in France, Germany and other countries in the European Union and Latin America.In 2018, Rentokil Initial was ordered to pay 60,000 euros by a French court for breaching an employee’s ‘right to disconnect’ from work, after requiring him to constantly have his phone turned on in case of emergencies, according to The Telegraph.($1 = 1.4885 Australian dollars) More

JACKSON HOLE, Wyoming (Reuters) – For academics and policymakers gathered at the U.S. Federal Reserve’s annual Jackson Hole economic conference to debate how central banks can affect market perceptions on the course of monetary policy, the Bank of Japan might appear to have gotten it right in July when it raised rates for a second time.In March the BOJ managed at last to end eight years of negative interest rates. The next month it began dropping hints it would kick off steady interest rate hikes if inflation remained on track to meet its forecasts.The message went ignored by markets, until last month. That’s when the BOJ backed hawkish signaling with action: It lifted short-term rates to 0.25% from 0-0.1% in a surprise move that triggered a global unwinding of carry trades that for the better part of a decade had been funded with ultra-cheap Japanese yen.The subsequent market rout forced the BOJ to backtrack and offer reassurance it won’t hike again until markets stabilise. And yet, it showed how central bank communication has maximum impact when words are matched with action.The BOJ’s experience dovetails with findings in a new research presented at this year’s Jackson Hole conference, where global central bank policymakers discussed ways to enhance their communication with markets.The paper – “Changing Perceptions and Post-Pandemic Monetary Policy” – showed how it took substantial rate hikes by the Fed for the public and markets to fully grasp how committed policymakers were to ensuring inflation returned to the U.S. central bank’s 2% target.”Policy rate actions contribute to, and may even be necessary for, the effectiveness of communication, particularly when uncertainty about the monetary policy framework is high,” the authors wrote. “As our evidence shows, a timely policy rate response to inflation matters not only for influencing immediate financial conditions, but also for signaling that policy makers are serious about responding to future inflation news.”To be sure, the highest Japan’s inflation rose was to 4.2% in January 2023, well below the 7.1% peak U.S. rate that pushed the Fed into rate-hike overdrive in June 2022. Japanese inflation in July was 2.7% and has held above the BOJ’s 2% target for more than two years, with broadening wage hikes starting to push up services prices.In current projections made in July, the BOJ expects core consumer inflation to stay around its target through the year ending in March 2027. It has also warned that yen depreciation could fan inflationary risks that warrant steady rate hikes.”We’re expecting that as inflation expectations remain stable at their new level close to 2%, the BOJ will start normalising policy rates,” IMF chief economist Pierre-Olivier Gourinchas told Reuters on Friday.”Certainly in our assessment, there is scope for further normalisation of monetary policy going forward, and policy rates to increase gradually for some time,” he said.CLEARER GUIDANCE NEEDEDThe BOJ has said it was clear on what would trigger rate hikes and that its policy decisions were more data-driven.But the fact it took an actual rate hike to get its hawkish message across highlights the communication challenge facing BOJ officials, including Governor Kazuo Ueda.The key complaint among analysts was that despite stressing it would be “data-dependent” in deciding when to raise rates, the BOJ pulled the trigger before there were clearer signs that consumption would emerge from the doldrums.That led them to believe the BOJ’s July hike was driven by a desire to support a nose-diving yen rather than by strong economic data.”The fundamental problem with the BOJ’s communication is that it needed to offer hawkish guidance to stem yen falls, even though many measurements of the economy were weak,” said Shigeto Nagai, head of Japan economics at Oxford Economics.In an about-face from the hawkish July communication, BOJ Deputy Governor Shinichi Uchida reassured jittery markets this month that it won’t hike rates while markets remained unstable.With a measure of calm now restored, though, Ueda returned again to hawkish jawboning, telling parliament on Friday the BOJ will keep hiking rates to levels seen as neutral – neither stimulating nor restricting the economy.To avoid confusing markets, the BOJ needs a medium-term framework with clearer guidance on its long-term rate hike path, some analysts say.While the BOJ issues quarterly long-term growth and inflation forecasts, it does not have a Fed-style dot plot of policymaker rate projections nor an estimate of the neutral rate.Ueda said on Friday there was not enough data to come up with a credible estimate on Japan’s neutral rate, though he added the BOJ would keep trying.”The primary task for the BOJ is to pull the market’s focus away from the next meeting or the next hike, and guide it more toward where rates will go over the medium term,” said Jeffrey Young, chief executive officer of U.S. research firm DeepMacro.”That’s something that we don’t really have a lot of guidance on.” More

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$75 per monthComplete digital access to quality FT journalism with expert analysis from industry leaders. Pay a year upfront and save 20%.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print edition More