3 things ASX investors should watch this week

These are the critical events to monitor for the health of your stock portfolio.

A man and a woman sit in front of a laptop looking fascinated and captivated.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

ASX shares are set for another eventful week.

Here are the most important events to keep an eye on, according to eToro market analyst Josh Gilbert:

1. Australian consumer confidence 

What a difference one month makes!

Last month, after the Reserve Bank of Australia held its cash rate steady after raising it for 10 consecutive months, Australian consumer confidence rocketed 9.4% higher.

"However, that confidence might be short-lived as the RBA increased its cash rate this week by another 25 basis points to 3.85%," said Gilbert.

"This rate hike will squeeze household budgets even further, with retail sales already showing that consumers are spending less, which is the RBA's aim."

The May interest rate rise would "undoubtedly" make this week's confidence update more pessimistic, he added.

"A saving grace for the index may be the increase in Australian house prices in April for the second month in a row, which may provide some relief to homeowners."

The better news in the longer run is that Gilbert reckons the Reserve Bank's shenanigans might be over for now.

"It seems that the RBA is now done with its hiking cycle, with rate cuts to occur in the second half of the year, which should help to increase consumer confidence significantly."

2. US inflation influences stocks everywhere, including ASX

According to Gilbert, this month's 25 basis point increase in the US could be the final chapter in the "largest hiking cycle for decades".

"With inflation moving in the right direction and now falling faster thanks to the banking issues in the US, the central bank appeared to soften its tone on interest rates — but reiterated that it would take time for inflation to return to target."

The massive takeaway from this week's numbers will be whether core inflation remains "sticky", because that could mean more rate rises and further downward pressure on stock prices.

Not to mention the chances of a recession.

In April, the US saw headline inflation dip to 5% while core inflation nudged up to 5.6%.

"Looking ahead to [the May] reading, headline inflation is expected to fall again, but only slightly to 4.9%, with core inflation expected to stay unchanged at 5.6%," said Gilbert.

"US Inflation is driving recession risks and the Fed, so another sharp decline in inflation will bring some further relief to investors."

3. Chinese inflation going the opposite way

Even though the other major economies are busy stamping out high inflation, China is trying to do the opposite.

"Chinese CPI rose by 0.7% in March but fell from 1% in February, compared to 6.3% in Australia, 5% in the US and 10.1% in the UK," said Gilbert.

"Prices in China are falling, and the People's Bank of China are providing plenty of fiscal stimulus and cutting interest rates in order to boost the economy."

The Australian economy and the stock market are closely associated with the fortunes of the world's most populous nation.

Deflation is currently the big worry for the Chinese economy.

"If goods and services continue to fall, consumers will delay spending, therefore increasing economic problems," Gilbert said.

"However, for now, the economy is recovering, with pent-up demand driving 10% retail sales growth and a sharp recovery in GDP of 4.5%."

China is now on track to be the only major economy to grow more in 2023 than in 2022, he added.

"Next week's inflation print will be a key reading on what's ahead for China, with expectations for inflation to decline once again."

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Investing Strategies

Smiling couple looking at a phone at a bargain opportunity.
Cheap Shares

I think these 2 cheap ASX shares are buys for value investors

Here’s why these ASX picks could appeal due to how cheap they are.

Read more »

A man wearing glasses and a white t-shirt pumps his fists in the air looking excited and happy about the rising OBX share price
Small Cap Shares

2 small cap ASX stocks with big price targets

Brokers have put big price targets on these small caps this month.

Read more »

Man holding out $50 and $100 notes in his hands, symbolising ex dividend.
Dividend Investing

These ASX dividend stocks offer 4% to 8% yields

Analysts are tipping these stocks as buys for income investors.

Read more »

A happy woman at her laptop punches the air, indicating a rising share price
Dividend Investing

Buy BHP and these ASX dividend shares now

Analysts think that income investors should be buying these shares.

Read more »

Man smiling at a laptop because of a rising share price.
Dividend Investing

Why now presents an 'attractive opportunity' to buy this quality ASX 200 dividend stock

The ASX 200 dividend stock could be trading at a long-term bargain.

Read more »

Man holding out $50 and $100 notes in his hands, symbolising ex dividend.
Dividend Investing

Overinvested in ANZ shares? Here are two alternative ASX passive income options

These investments could add pleasing dividend diversification.

Read more »

Small girl giving a fist bump with a piggy bank in front of her.
ETFs

Here's why small-cap ASX ETFs are on the rise

Some are outperforming the exchange-traded funds tracking the ASX 200 and ASX 300.

Read more »

three businessmen high five each other outside an office building with graphic images of graphs and metrics superimposed on the shot.
Blue Chip Shares

Buy these 3 high-quality ASX 200 blue chip shares in December

Analysts think these high-quality shares are buys right now. Let's see what they are saying.

Read more »