NEWS + VIEWS – 10/04/2026
MARKETS
Over the past week, global share markets have been highly reactive to headlines around tensions in the Middle East – rallying strongly when ceasefire optimism improved sentiment, then falling again when doubts resurfaced. Sharp swings in oil prices have been central and weaker economic data from the US has added uncertainty about interest rates and future growth.
The Australian share market has been sensitive to global shocks, fluctuating with geopolitical news, with rising fuel costs and supply concerns weighing on sentiment and sectors like transport and retail, while resource stocks have at times benefitted from commodity price spikes.
CONFESSION SEASON
‘Confession season’ is almost upon us, where companies adjust full-year guidance ahead of August reporting. For the past nine months, the heavyweight banking and mining sectors have driven a rapid improvement in the Australian share market’s profit outlook. But according to a recent article in the Financial Review, that could unwind within weeks as companies reveal the damage inflicted by interest rate increases and rising energy costs sparked by the conflict in the Middle East.
Analysts had significantly increased their earnings forecasts since July as surging commodity prices unleashed a wave of upgrades in the resources sector and the major banks defied concerns that intense competition would squeeze their margins, expecting ASX 200 earnings to grow 13.7% in the 2026 financial year and 10.1% in FY 2027. However, Morgan Stanley said that those forecasts are now stale and would likely shift from late April, which marks the start of confession season.
Trading outlooks will provide insight into how businesses are handling the spike in energy prices, which has fuelled expectations that the Reserve Bank of Australia could lift the official interest rate three more times this year to try to contain inflation. The double-digit earnings profile will come under pressure, with the greatest risk skewed to FY 2027.
Resources
Resource stocks have accounted for a almost 65% of the growth in ASX 200 profit expectations over the past year (see chart below), due to rising prices of everything from gold and silver to copper and aluminium. Earnings for the materials sector are now expected to jump 34% in FY 2026 but this lofty projection will be tested from this month as mining companies release their quarterly updates.
Concerns about a looming diesel shortage plunged the ASX Materials Index into a bear market in late March, marking a 20% drop from its peak. Although the sector has bounced since then, investors remain in the dark about how much fuel each miner has left.
Source: Morgan Stanley
Banks
Bank stocks have been the other main contributor to the share market’s improving profit outlook after the lenders delivered robust credit growth, rising margins and benign levels of bad debts in the February reporting season. Consensus expects earnings for the financials sector to jump 10% in FY 2026 and 4% the following year. However, research platform MST Marquee warns that the major lenders may face headwinds, including a weaker outlook for the housing market that could trigger a slowdown in lending.
Soaring bank valuations have been a key driver of the share market rally over the past few years. The ASX 200 is trading at about 17.2 times forward earnings, way above its 15 year average of 14.8 times. But excluding the banks, the price/earnings ratio is lower at 16.5. The banks, particularly the Commonwealth Bank (CBA), remain too expensive for value funds and the profits outlook is too weak for growth funds. The chart below compares Australian bank valuations to those of other global banks.
Source: Bloomberg, VanEck
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