16 Feb 2024
Company reporting season off to a reasonable start
Markets
- Local and global stocks had a mixed week as investors digested company reporting and continued talk from central bankers pushing back on early rate cut hopes.
- In local stock news, CSL shares fell sharply after the company announced a treatment it had spent two decades and almost one billion dollars developing didn’t appear to prevent secondary heart attacks. The company posted a half-year net profit of $1.9 billion, up 20% from a year ago.
- BHP shares fell after the company said it would take a $3.9 billion non-cash impairment on the carrying value of its WA nickel operations, given the sharp fall in nickel prices.
- Macquarie Group’s profit fell due to reduced activity in its commodities and global markets business, while the long-standing head of the division will step down later this month to pursue other opportunities. Macquarie talked to softer conditions for M&A and deal flow ahead.
- CAR Group (carsales.com) shares rose after meeting first half earnings expectations while guiding for strong growth.
- ANZ Bank provided a quarterly trading update with earnings slightly beating expectations driven by solid trading revenue and another period of low bad debts.
- James Hardie shares fell after the company reported third-quarter earnings of $234 million, slightly above consensus estimates but disappointing traders.
- Breville shares fell after the company posted a 6.7% rise in half-year net profit, with a softer than expected set of first-half numbers on both revenue and profit, but a strong margin result.
- Treasury Wines delivered a good result relative to low expectations from the market, with earnings coming in at $290 million on better-than-expected revenues.
- Downer shares rose strongly to a fourteen-month high after the company delivered a first-half profit up 3.8% from a year ago. Cost control and cash conversion came in ahead of expectations.
- Dexus shares fell despite a better than expected first half from Australia’s largest office landlord, with earnings 5% ahead of expectations with a solid dividend declared. Office occupancy nationally was 94.5% down slightly from June while incentives fell.
- South32 shares fell after the company reported higher costs on operations, financing, and capital expenditure even though their first half result was broadly in line with expectations.
Economics
- The Australian unemployment rate increased to 4.1% in January, a reasonable rise from the 3.6% reported back in September 2023. Employment rose ever so slightly in January after a large fall in December, whilst the participation rate was flat.
- RBA governor Michele Bullock told the House Economics Committee than an inflation with a “4” in front of it is not good enough and is still some way from the midpoint of their target.
- Australian consumer confidence increased by 6.2% in February but remains weak. In contrast, business conditions continued to ease but remain at the long run average in January.
- US central bank members continue to push against early rate cuts seeing no urgency to cut rates and are focused on returning inflation to target. The market is now pricing a 53% probability of a first rate cut in June.
- US retail sales fell 0.8% in January coming in below expectations. Import prices rose as did export prices, with both coming in above expectations, whilst industrial production fell.
- Two key US manufacturing indices rose in February with both coming in significantly better than expected.
- US consumer inflation expectations for the year ahead were unchanged at 3% in January, remaining at the lowest levels in three years.
- US inflation rose by 0.3% in January, coming in above expectations to be up 3.1% on the year. Core inflation rose by 0.4% which was the biggest lift in eight months, with the annual rate steady at 3.9% but above expectations.
- UK data showed inflation unexpectedly held steady in January at an annual rate of 4%, easing fears of an increase, with food prices finally falling again.
- Britain’s economy fell into recession in the second half of 2023, with the economy contracting by a worse than expected 0.3% in the December quarter.
- The Bank of Japan governor said financial conditions will remain accommodative even if they were to end negative interest rates.
- Japan’s economy grew 1.9% in 2023, despite some weakness in the December quarter, whilst improving on the 1% growth in 2022.
Politics
- The European Union proposed trade restrictions on more than twenty firms, including three Chinese companies, for allegedly supporting Russia’s war efforts in Ukraine.
- The US rejected Russian President Vladimir Putin’s suggestion of a ceasefire in Ukraine.
- German direct investment in China rose by 4.3% to a record high $11.9 billion Euros last year. The news confirms German firms continue to invest heavily in China despite the German government’s pleas for them to reduce exposure.
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