A massive week for ASX shares is about to commence.
These are the three most crucial events happening over the next few days that could impact your portfolio, according to eToro market analyst Josh Gilbert:
1. Reserve Bank cash rate decision
This week's biggest event is an easy pick.
The June rate decision, due 2:30pm Tuesday eastern time, has been made extra spicy at the eleventh hour with last week's higher-than-expected inflation numbers.
According to Gilbert, financial markets have been pricing in "at least one more hike" by August.
"The chance of that hike being handed down this week is high, with governor Lowe continuing his hawkish stance that he will do what is necessary to return inflation to the 2% to 3% target."
The great shame is that up until those inflation figures last week, all the other statistics were pointing to a pause in interest rate rises.
"Retail sales for April were flat, the May employment print was softer than expected, wage growth also showed signs of easing and business conditions pointed to weaker conditions."
Interest rates are now at a decade-high after 11 hikes in just 12 months.
"Investors should expect that they [RBA] aren't done yet. This may pressure the local market, with investors not expecting this aggressiveness from the RBA."
2. Gross domestic product update
As big as the rate decision is, Wednesday's quarterly GDP numbers are also a critical barometer of Australia's economic health.
Gilbert reckons economic growth "could face some significant headwinds".
"Expectations are for year-over-year growth of 2.7% and quarter-over-quarter growth of 0.4%," he said.
"Consumption is a key part of GDP, accounting for roughly 60%, meaning that slowing retail sales will weigh on growth locally as rate hikes from the RBA see consumers cutting back."
Immigration has driven Australia for more than a decade, according to Gilbert, so the 2% forecast expansion in the population this year could be the difference between a recession or avoiding the bullet.
"The RBA expects GDP growth to slow this year as higher interest rates force consumers to tighten their belts."
3. China's spluttering recovery
Inflation and balance of trade figures will be released out of China this week.
According to Gilbert, this will provide clues as to how China's faltering post-COVID economic revival is going.
"China's recovery losing steam may weigh on the local market," he said.
"Last week's disappointing manufacturing data has stoked investor fears of weakening demand from the world's biggest buyer of raw materials."
Of course, the ASX is dominated by the resources industry, so China's thirst for minerals has a big impact on Australian portfolios.
"The local materials sector has felt the full force of a recovery that has been more consumer-focused rather than manufacturing, with ASX's second biggest sector the third worst performing in 2023," said Gilbert.
"That weakness may continue as concerns grow over the expectation that China's commodity demand could remain in decline with no real sign of imminent policy response from Beijing."
While stocks have generally rallied around the world this year, the Hang Seng Index (HANGSENG: HSI) has plunged almost 7%.
"The key will be economic support in the form of stimulus that may help to support further downside risks."
