The resiliance of the Australian stock market has been one of the more striking features of investing over the past six months.

This week in finance: Reporting season starts with Rio Tinto's interim result (Wednesday)

Reporting season starts with Rio Tinto's interim result (Wednesday) Retail sales (Thursday) & trade balance (Friday)

Retail sales (Thursday) & trade balance (Friday) Central banks meetings: BoJ (Tuesday), US Fed Reserve (Wednesday), BoE (Thursday)

Since Australia Day, the ASX200 has gained 4 per cent while the likes of the S&P500 in the US and the global MSCI index have gone backwards.

China's Shanghai composite is down around 20 per cent.

Whether that out-performance is justified, and if it can be maintained, may become clearer from this week as corporate Australia releases its June half earnings reports.

Earnings growth is looking strong, around 7 per cent, but some valuations are decidedly stretched.

Stripping out financials and miners, industrial stocks are trading at a price-to-earnings multiple of more than 21-times, a level only seen immediately before the GFC broke loose.

Reality check

However, the results season may provide something of a reality check.

Morgan Stanley's local investment strategy head Chris Nichol said the setup now requires earnings to deliver.

"Our view is that whilst expectations seem low, outlooks will be unlikely to deliver upgrades given the muddle-through nature of current conditions," Mr Nichol said.

He said while Australia was enjoying a "renaissance of resilience" versus its regional peers, headwinds building up in the domestic economy suggest a more defensive stance is needed.

"Against this backdrop, our ongoing caution about the outlook for both the ASX200 and the economy lies with endogenous risks that are building in both the housing-linked and consumer-facing sectors," he said.

Key themes

Morgan Stanley has broken down the key themes the market will be watching over the next few weeks.

Housing: Credit has tightened further, sentiment is slipping, and additional stock is hitting the market. With a likely trough in conditions still someway out, the performance of the September quarter of housing-linked sectors will be critical to assessment of Australia's key economic risk. Banking: Banks enjoyed some reprieve over the last 6-8 weeks [+5.7 per cent relative to the broader market] as investors bought back into yield. Morgan Stanley has an underweight position in banks position due to a combination of slowing revenue, rising risks and continued regulatory headwinds. This, it argues, will lead to mixed results and underwhelming outlooks. Resources: Copper has fallen 14 per cent from its peak this year, oil has retraced some of its strength, global growth seems less synchronized thanks to trade frictions and both US and Chinese GDP growth should be slower in second half of 2018.

Retail: For discretionary retail and the broader consumer linked space, whilst expectations are low, the capacity to surprise is inhibited by a continued stretched wallet thanks to subdued wages and higher cost of living pressures.

First week results

Rio Tinto's half-year results will be dominated by its iron ore division's earnings and prospects. ( Supplied: Rio Tinto )

Rio is expected to deliver underlying earnings of around $US4.5 billion ($6 billion), 15 per cent up on the first half last year, which in turn was 150 per cent higher than 2016.

All Rio's divisions should be profitable, although energy earnings will fall as Rio continues to retreat from coal mining.

The iron ore division, which delivers around two thirds of the company's earnings, is likely to report a 3 per cent rise in profits.

Costs are starting to edge up, but some lucrative asset sales in coal and the stake in an Indonesian copper mine should see debt cut and the prospect of a fairly juicy dividends for shareholders.

Janus Henderson is likely to deliver a solid result with funds-under-management starting to creep up again, while the California-based, healthcare company Resmed is expected to roll out a very robust earnings result driven by double-digit sales.

US market de-fanged

While the broader US earnings season is humming along with earnings up more than 20 per cent, the big news has been the "unfriending" of the tech sector, or more particularly social media players.

Facebook's $US120 billion fall on Thursday has rewritten the record books for single day capitulations by value.

The much smaller, micro-blogging platform Twitter was given the bird too, down around 20 per cent on Friday.

A lot has been written in the past few days about the rupture, but put simply, the market suddenly grasped the idea that the herculean prices being paid for some of the tech-darlings didn't match up with their merely mortal earnings growth.

The idea of cracking down on privacy issues and dodgy accounts, while seemingly a sound business practice, was a red flag for investors

The events of the last few days has certainly caused a split in the field for the tech giants' race to a trillion dollar valuation.

The FANG — or more appropriately FAANG; Facebook, Apple, Amazon, Netflix and Google/Alphabet — stocks are looking a bit toothless at the moment.

Facebook is out of the hunt for a trillion dollar capitalisation any time soon, while Netflix was lucky to even be in the same conversation.

MAGA is perhaps a better acronym for the trillion dollar tech wannabes; Microsoft, Amazon, Google and Apple. Coincidently, it also works for Make America Great Again.

Markets dip

The tech retreat dragged down Wall Street on Friday.

The spiritual home of the FAANGs, the Nasdaq, was down another 1.5 per cent on Friday, while the Dow Jones Index and S&P500 also finished in the red despite a big headline second quarter GDP result.

Nonetheless, Wall Street has clawed back most of the losses from February's correction, and is back with touching distant of a record high.

While the ASX finished last week strongly, futures trading point to a the market opening under water this week.

Markets on Friday's close: ASX SPI 200 futures -0.4pc at 6,225 ASX 200 (Friday's close) +0.9pc at 6,300

ASX SPI 200 futures -0.4pc at 6,225 ASX 200 (Friday's close) +0.9pc at 6,300 AUD: 74.0 US cents, 63.5 euro cents, 56.4 British pence, 82.2 Japanese yen, $NZ1.09

AUD: 74.0 US cents, 63.5 euro cents, 56.4 British pence, 82.2 Japanese yen, $NZ1.09 US: Dow Jones -0.3pc at 25,451 S&P500 -0.6pc at 2,819 NASDAQ -1.5pc at 7,737

US: Dow Jones -0.3pc at 25,451 S&P500 -0.6pc at 2,819 NASDAQ -1.5pc at 7,737 Europe: FTSE +0.5pc at 7,701 DAX +0.4pc at 12,860 EuroStoxx50 +0.4pc at 3,527

Europe: FTSE +0.5pc at 7,701 DAX +0.4pc at 12,860 EuroStoxx50 +0.4pc at 3,527 Commodities: Brent oil +1.8pc at $US74.29/barrel, Gold +0.1pc at $US1231/ounce, Iron ore $US66.50/tonne

US GDP surge

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US President Donald Trump was quick out of the blocks to hail second quarter economic growth jumping to 4.1 per cent on annualised basis.

"We have accomplished an economic turnaround of historic proportions," Mr Trump said.

"These numbers are very, very sustainable," he added.

But some context may be useful.

While it was the strongest growth since late 2014, it was still somewhat behind the 5.1 per cent delivered during the Obama administration four years ago, and on par with a few other quarters over that period.

Now the 16 per cent spike in 1978 was a turnaround of "historic proportions". Of course, it was short lived and was precursor to a pretty nasty period of economic contraction.

Tax and soybeans

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Sustainability, is the other issue in a result kicked along by consumers spending their tax cuts and flurry of soybean exports ahead of Chinese tariffs being imposed.

The soybean surge won't make it to the next quarter, while the tax stimulus is expected to fade next year.

Chief economist at Gluskin Sheff, David Rosenberg, for one was not impressed by the "historic" nature of the turnaround.

"I know I will be accused of cherry-picking the data, but this is called analysis, not reporting," Mr Rosenberg tweeted.

"The key here is sustainability. Adjusting for the transitory fiscal juice, soybean export boom and lumpy defence spending, real GDP growth was really closer to 2 per cent, not 4 per cent in Q2," Mr Rosenberg said.

"So expect the economy to revert to this trend as the cumulative effects of everything the Fed has done and intends to do hits the economy with the traditional lags."

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Digging deeper into the figures, while consumers happily opened their wallets, the bigger concern was home building investment fell again, as did business investment.

Government spending, particularly in defence, also helped spur growth along.

Last week, the International Monetary Fund published a report suggesting annualised US GDP growth would come in a tad under 3 per cent, which is not too shabby, but a bit off a "sustainable period" of 4 per cent growth.

Fed on hold, will BoE hike?

Fed Reserve chair Jerome Powell is likely to make President Donald Trump happy, at least for this month, by keeping interest rates on hold. ( Reuters: Carlos Barria )

The US Federal Reserve, Bank of England and Bank of Japan all meet next week, but don't expect any fireworks.

The Fed will look through the GDP spurt, for which Mr Trump, who has complained about rising borrowing costs, should be thankful.

Societe Generale's chief US economist Omair Sharif is not spending too much emotional capital on the result.

"The FOMC [Federal Open Markets Committee] meeting should be a snoozer," Mr Sharif said.

"The Fed is expected to hold rates in the current 1.75 per cent to 2 per cent range, no press conference, and no updated projections.

"In terms of the statement, we expect only modest tweaks, especially given that the June statement saw wholesale changes. The statement will reinforce the idea that further gradual rate hikes are appropriate — for now," he said.

The Bank of England is a different matter.

Despite the on-going Brexit kerfuffle, the UK has regained a bit of momentum and a few BoE board members voted for a hike last month.

It may be delivered this week.

On the other, the Bank of Japan is going nowhere for a while and will leave rates stuck below zero.

The real interest remains the Peoples' Bank of China.

It has been loosening policy for months. More tinkering is expected as the economy slows, US tariffs bite and the yuan continues to slide.

Trade, retail and house prices

Locally, the key data releases relate to property with building approvals (Tuesday) and house prices (Wednesday), as well as retail (Friday) and trade (Thursday) figures.

The weakness in Australia's housing market seems inversely proportional to strength of its media coverage.

House prices are expected to show another clunky fall in July of around 0.5 per cent.

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Auction clearance rates in Sydney and Melbourne appear to have picked up a bit on the weekend, but are still pretty week.

Only around half the properties put up for sale in Sydney were sold under the hammer. It was closer to 60 per cent in Melbourne.

Building approvals, while high, are softening.

June's figures may not be so bad, if for no other reason than the 30 per cent dive in Queensland during May is unlikely to be repeated this time around.

Private sector credit (Tuesday) may nudge up slightly, but the housing sector part of the equation is expected to be softer due to tighter lending standards and an overall cooling property market.

Retail sales may surprise. Recent results have been stronger after a weak first quarter.

Improving consumer spending may just come to the rescue of second quarter GDP.

The trade balance has bounced all over the shop and has been the subject of some pretty savage downward revisions.

Market forecast have been well out of the money, but a surplus of $1 billion — on the back of increased shipments of coal and iron ore in June — is a nice round number, and as good a guess as any.

Australia

Date Event Forecast Tuesday 31/7/2018 Building approvals Jun: Weakening, down around 5pc on a year ago Private sector credit Jun: Has been steady, but likely to soften on the back of weaker property borrowing Origin Energy update June quarter production and sales. LNG exports ticking up Wednesday 1/08/2018 Rio Tinto interim result Underlying net profit around $4.5bn, +15pc on last year. House prices Jul: CoreLogic series, fell in June, unlikely to have bottomed yet Thursday 2/08/2018 Trade balance Jun: May was weaker than expected, surplus should expand to around $1.3bn Friday 3/08/2018 Resmed FY result Underlying profit around $510m. Sales growing solidly Retail sales Jun: Hasn't been a great year, but may be picking up

Overseas