25 Aug 2023
Investors eagerly await Powell’s Jackson Hole speech
Markets
- Local and global equity markets had a volatile and mixed week, rising early in the week on very strong US technology stock results, and then fell away on concerns of what the US central bank chair might say at the Jackson Hole summit.
- In local news, Magellan shares rose after the company reported an inline result but surprised with a special dividend and better cost guidance. It also helps when the funds you run begin to outperform again.
- Iress shares fell sharply to a more than decade low after the financial software company suspended its dividend following a first-half loss of $139.8 million. Investors now questioning the balance sheet.
- A2 Milk shares dropped more than 13% to a one-year low after the company announced a jump in net profit but forecast a tougher operating environment for this financial year, particularly for the Chinese market.
- Westpac Bank announced that ongoing mortgage competition had cut into its net interest margin in the third quarter. The bank made an unaudited net profit of $1.8 billion, with expenses up around 5% from a year ago.
- BHP shares fell after the company announced a 37% decline in net profit to $20.1 billion, missing analysts’ forecasts, as China’s struggling economy weighed on demand for iron ore and other commodities.
- Coles shares fell sharply to a one and a half year low as the supermarket giant announced a 4.8% rise in profit to $1.1 billion, slightly missing expectations. The company also reported stagnant liquor sales, continuing food inflation in bakery and dairy products, and an industry wide surge in shoplifting. An obvious negative in the shift to self-serve checkouts.
- Scentre Group shares gained after the Westfield owner announced that its half-year net operating income had grown 10% to $981.9 million, a record for the first half. Customer visitations were up almost 10%.
- Woodside Energy reported a mixed set of results with a solid first half but costs up and the outlook more muted. The company maintained capital expenditure and production guidance, whilst they are also expecting better LNG prices.
- Domino’s Pizza shares soared to a six-month high as the pizza chain announced cost-cutting moves and improved sales in the first few weeks of the 2023/24financial year. Revenue was broadly in line with forecasts, with total sales up 2.2%, but earnings came in 23% lower as higher prices offset fewer sales.
- Corporate Travel Management shares fell, even though their full year result was largely in line with expectations, with the market not liking the slightly weaker guidance. Revenue was up 70% and profit before tax beat expectations. Earnings were supported by contract wins, strong margins, and higher travel costs (ie. higher commissions).
- Oil prices fell this week as concerns rose regarding the economic outlook as manufacturing data weakened globally.
Economics
- US new orders for long-lasting goods fell 5.2% in July, the steepest slump since April 2020 and worse than the 4.1% fall expected by economists.
- An S&P global report showed US business activity fell to six-month low in August.
- US existing home sales fell by 2.2% in July to a 4.07 million annualised rate, coming in below expectations. New home sales rose by 4.4% in July to a 714,000 annualised pace, coming in above expectations.
- A key US manufacturing index showed both production and services fell further into contractionary territory in August, with both readings coming in below expectations.
- The Chinese central bank cut the one-year loan prime rate by a smaller than expected margin and maintained the equivalent five-year rate (a reference for mortgages). Markets and economists were expecting bigger cuts.
Politics
- China imposed a ban on all imports of Japanese seafood after Tokyo Electric officials began to discharge treated wastewater from the wrecked Fukushima nuclear site into the Pacific Ocean. Japanese officials have called for the ban to be lifted immediately.
- Australian Federal Treasurer Jim Chalmers has backed his Transport Minister’s decision to reject Qatar Airways’ request to land additional flights in Australia, parroting Qantas CEO Alan Joyce’s claims that the decision would not prevent extra capacity from entering the market. The news comes as Qantas announced a $500 million share buy-back and follows Qantas cutting costs by using foreign staff on code-share flights.
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