The start of the full-year reporting season is likely to bring little in the way of strong company earnings, but investors should benefit from rising dividends despite lower commodity prices and slowing Chinese growth.
Reporting season commences this week and analysts are expecting a fairly flat earnings season with few surprises, a moderate lift for equities and reliable dividends. The key themes will be the low iron ore price, the higher US dollar, capital head winds for the banks and flat retail sales.
"We're not expecting a big earnings season," Credit Suisse equity analyst Damien Boey said.
"We expect to see more companies trying to take advantage of the low cost of debt and returning cash to shareholders."
Trade at the start of the week is likely to be muted. The SPI futures index was down 12 points or 0.2 per cent, and Wall Street dipped slightly on Friday night following weaker-than-expected wages data.
The low cost of debt is likely to continue for the rest of the year with analysts not expecting an interest rate hike until 2016. The RBA will announce its monthly cash rate on Tuesday and lodge a statement on monetary policy on Friday.
"This week, we are not expecting the RBA to cut interest rates below the current level of 2.0 per cent," Capital Economics Australian and New Zealand economist Paul Dales said.
"But we wouldn't completely rule out a cut, especially if the RBA revised down its GDP growth forecast for 2016 in the Statement on Monetary Policy."
Westpac chief economist Bill Evans said they were expecting no change to interest rates but added the bank would be reconsidering its assumptions of 3 and 3.25 per cent in GDP growth.
Also due out this week is employment data on Thursday. UBS economist George Tharenou has warned weak capital expenditure in the non-mining sectors could lead to a spike in unemployment.
"The larger risk for overall jobs remains non-mining capex, given a strong coincident relationship. Worryingly, despite better business conditions, data suggest a non-mining capex 'double-dip', which flags the risk of broader jobs weakness," Mr Tharenou said in a note.
The week will also start with key events in the two markets that cost the Australian Securities Exchange billions in recent weeks: China and Greece.
Greece's share market will reopen after a five-week suspension as part of its government's attempt to hold back a financial collapse.
But local investors are more likely to be tracking the Chinese equity markets and the release of the Caixin purchasing managers full suite of reports. Late last week, the weekend China's National Bureau of Statistics released its purchasing managers index, which slipped to just 0.1 per cent above the minimum to signal expansion and caused a significant sell off shares listed on the Shanghai Composite Index, which slide 1.1 per cent.
"While we do not consider the current stock market turbulence a financial crisis, the very volatile stock market may negatively affect business confidence and investment decisions," ANZ researchers in China said in a note.
Weaker data out of China could set back any hope of a recovery among key Australian commodities such as iron ore and copper. On Sunday, iron ore delivered to Qingdao port in China was fetching $US53.41 per tonne, down 10 per cent in a month.
The Australian dollar spent the last week around US73 cents and is likely to remain around this six-year low amid low commodity prices, a rising US dollar and weaker economic data from major trading partner China.
BK Asset Management managing director of foreign exchange strategy Kathy Lien said the weaker economic data out of China over the weekend would push the Australian dollar down further.
"It's no secret that China is slowing and the meltdown in stocks have returned but it is just a matter of whether the government allows their data to reflect that. The weakness in China is also expected to have taken a big toll on Australia's economy," Ms Lien said.
