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ASX opens higher as Wall St rallies, JB Hi-Fi hikes dividend, Carsales profit jumps

JB HI-FI

Australian shares have started the day higher, tracking gains on Wall Street.

The ASX 200 was up 35 points, or 0.5 per cent, to 7,067, at 10:16am AEST.

At the same time, the Australian dollar was flat, at 71.17 US cents.

Shares of JB Hi-Fi rose 0.2 per cent, to $45.61, after the electronics retailer reported a 7.7 per cent jump in annual earnings, to $544.9 million, as higher store traffic driven by the easing of COVID-19 restrictions complemented continued growth in online you go out.

The company was one of the beneficiaries of the pandemic as work-from-home mandates meant higher demand for electronics.

With easing of COVID-19 restrictions, the company was able to reopen all of its stores in the latter half of the financial year, while online sales over the year registered a 52.8 per cent jump.

This helped it increase the company’s full-year dividend payout to $3.16 a share, up from $2.87 in the prior financial year.

The company noted that the cost of doing business in Australia was higher, in-line with higher inflation in the country, while reporting higher sales in Australia and its The Good Guys brand for July.

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Domino’s stock falls on ASX, while local share market won’t drink ‘Kool Aid’ on inflation

Pizza Italy pandemic

Australian fast-food chain Domino’s is losing ground on the local share market, as the global brand exits the country that made pizza famous.

The company that has the Australian franchise rights to Domino’s fell 6 per cent on the ASX on Friday, to $69.31.

ASX-listed Domino’s Pizza Enterprises not only runs the brand in Australia and New Zealand, but also in Belgium, France, The Netherlands, Japan, Germany, Luxembourg, Denmark and Taiwan, with a total of more than 3,100 stores.

The fall came after news broke that the global brand is exiting Italy, seven years after it opened its first store there.

While the Italian and Australian arms are not connected, some investors appear to have taken fright from the brand’s struggles internationally.

The rise of delivery services — such as Deliveroo, Just Eat and Glovo — took away any advantage the American company thought it would have in Italy, according to a report to investors in 2021 by its Italian franchise holder ePizza SpA.

In Australia, the same pressures are hitting the takeaway sector too.

Domino’s Pizza has more than 18,500 stores worldwide in at least 90 countries. Most are run as franchises, including in Australia.

Energy gains but ASX falls

The energy sector was the leading light on the Australian share market today, after oil prices climbed back above $US100 a barrel overnight, with the benchmark Brent crude oil futures contract sitting just below that mark at 4:50pm AEST.

Woodside Energy Group led the gains on the ASX 200, with a 3.7 per cent rise.

Beach Energy (+3.1 per cent) and Viva Energy (+2.6 per cent) also had strong sessions.

Coal miners New Hope (+3.5 per cent) and Whitehaven (+2.5 per cent) also jumped on board the energy bandwagon.

However, while rising energy costs are good for producers, they are bad for most of the rest of the economy and may also put pressure on interest rates to keep rising at a fast pace.

That saw the ASX 200 and All Ordinaries indices both fall 0.5 per cent, to 7,033 and 7,289 points respectively.

Industrials — many of which are exposed to rising energy costs — were the worst-performing sector, down 2 per cent.

Consumer cyclicals — generally very exposed to rising interest rates that reduce household spending — fell 1.2 per cent.

The worst-performing companies on the ASX 200 were Lake Resources (-13.5 per cent), Novonix (-8.6 per cent), Telix Pharmaceuticals (-7.7 per cent), Arena REIT No 1 (-6.7 per cent) and Nanosonics (- 6.4 per cent).

IAG returns to profit

Profit reporting season continued in Australia today.

Major results out today included insurer IAG.

It announced its net profit is up to $347 million. That comes after it lost more than $400 million the previous financial year.

Its profitability is up despite its overall revenue actually down $548 million overall on the previous financial year to $18.34 billion.

The insurer said its growth “predominantly reflected rate increases to offset inflationary pressures in the supply chain and natural perils.”

It said its insurance margins were 7.4 per cent below expectations after it had to pay out a large amount of premiums for natural disasters.

This year has seen enormous amounts of claims linked to the east coast floods and storms. IAG itself was hit by more than $1 billion.

IAG gained 1.1 per cent, to $4.66.

It is paying a dividend of 5 cents per share, down from last year’s 13-cent payout.

Investors not buying the inflation ‘Kool Aid’

The ASX traded down after Wall Street had mixed results overnight.

In the US, the Dow Jones closed flat, the S&P500 ended down 0.1 per cent, and the tech-heavy Nasdaq was off 0.6 per cent.

Wall Street surged the previous day when US markets rose after the world’s biggest economy released its latest inflation data.

The data showed price hikes were starting to ease, which might soften concerns about another big rate hike of up to 0.75 per cent next month.

However, San Francisco Fed president Mary Daly said it was too early to “declare victory” on inflation, despite the better figures.

Ms Daly also said a 0.5 per cent rate hike in September was currently her “baseline”, and jobs and worker data that would be out soon also needed to be taken into consideration.

Oil up as people switch from costly gas

US 10-year Treasury yields have risen slightly, in an indication that markets, too, are still betting on rate hikes.

City Index analyst Tony Sycamore said it looked like investors will still betting on the rate US hike to be as high as 0.75 per cent.

“The interest rate market is clearly not drinking the same post-inflation Kool Aid that the equity market has slugged on,” he said.

“Financial markets initially reacted positively to [US inflation] data that showed inflation in the US is moderating, but gains [were] then whittled away on concerns the market may have overreacted,” ANZ also noted.

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Wall Street flounders and ASX set to drop as markets mull over inflation ‘victory’

A blurred photo of the share trading boards at the Australian stock exchange

Australian shares are set to falter as global markets ponder whether the worst rate hikes are over.

Wall Street had mixed results overnight, with the Dow Jones closing flat, the S&P500 down 0.1 per cent, and the tech-heavy Nasdaq off 0.6 per cent.

Wall Street surged the previous day when US markets rose after the world’s biggest economy released its latest inflation data.

The data showed price hikes were starting to ease, which might soften concerns about another big rate hike of up to 0.75 per cent next month.

However, San Francisco Fed president Mary Daly said it was too early to “declare victory” on inflation despite the better figures.

Ms Daly also said a 0.5 per cent rate hike in September was currently her “baseline”, and jobs and worker data that would be out soon also needed to be taken into consideration.

With Wall Street now retracting its flush of optimism, ASX 200 futures were also down in early-morning indications.

They were down 1.5 per cent by 7am AEST.

Oil up as people switch from costly gas

US 10-year Treasury yields have risen slightly in an indication that markets too are still betting on rate hikes.

“Financial markets initially reacted positively to [US inflation] data that showed inflation in the US is moderating, but gains then whittled away on concerns the market may have overreacted,” ANZ noted.

“At close, the Euro Stoxx 50 had gained 0.2 per cent, the FTSE 100 dropped 0.5 per cent, while the S&P 500 and the Dow Jones were largely unchanged.

“The yield on the US 10y note jumped 11bp higher to 2.89 per cent.”

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UK braces for long recession after biggest interest rate hike in 27 years, ASX to open flat

British flag on a flagpole.

Australian shares are likely to start the day relatively flat, after the Bank of England announced its biggest interest rate hike in 27 years and warned of a long recession for Britain.

ASX futures were up 0.1 per cent, to 6,891 points, by 8:40am AEST.

The Australian dollar was trading at 69.6 US cents, after rising 0.2 per cent overnight. This was largely due to a weaker US greenback.

It follows a lackluster session on Wall Street, which saw the Dow Jones index fall 0.3 per cent, to 32,727 points, the S&P 500 lose 0.1 per cent, to 4,152, and the Nasdaq Composite gain 0.4 per cent, to 12,721.

“The market is looking for direction after a strong bounce that highlighted the deep pessimism that had permeated the markets,” said Yung-Yu Ma, chief investment strategist at BMO Wealth Management.

“Many signs indicate that [US] inflation has peaked and the question now turns to how quickly it will come down or whether stickier components will keep it higher than the Fed [Federal Reserve] is comfortable with.”

Recession fears were also on the minds of oil traders, and the possibility this could sink energy demand, as crude prices dropped to their lowest level since before Russia’s invasion of Ukraine in February.

Brent crude plunged 3.6 per cent, to $US93.34 a barrel.

Spot gold jumped 1.5 per cent to a one-month high of $US1,792 an ounce.

Recession for the UK

Britain’s central bank raised interest rates by 0.5 percentage points on Thursday evening (AEST), its biggest increase since 1995.

This was despite the BoE warning that a long recession was on its way, as it rushed to smother a rise in inflation which is now expected to peak at 13.3 per cent in October — up from its previous forecast of 11 per cent.

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ASX to rise, Wall Street snaps two-day losing streak as tech stocks rebound

Close up of red and green numbers on ASX board

Australian shares are expected to start the day higher as US technology stocks rebounded overnight, lifting the Nasdaq to a three-month high.

ASX futures were up 0.5 per cent, to 6,913 points, by 7:50am AEST.

The Australian dollar was trading at 69.5 US cents, after a 0.5 per cent rise overnight.

Wall Street’s main indexes rebounded, after dropping for the past two days.

The Nasdaq jumped 2.6 per cent, to 12,668 points, its highest level since early May, and the S&P 500 climbed 1.6 per cent, to end the session at 4,155, while the Dow Jones index rose 1.3 per cent, to 32,813.

Spot gold rose 0.2 per cent, to $US1,763.10 an ounce.

Meanwhile, oil prices fell sharply, with Brent crude futures down 3.4 per cent, to $US97.10 a barrel.

It comes after the OPEC+ group of oil-producing nations, including Saudi Arabia and Russia, announced that it would increase its supply by a mere 100,000 barrels per day.

On top of that, a new report from the Energy Information Administration showed an unexpected surge in US crude and gasoline stocks.

“Oil is still up 25 per cent from the beginning of the year,” said Oliver Pursche, senior vice president at Wealthspire Advisors in New York

“This recent drop is a combined result of that and a reflection that there is going to be an economic slowdown. The market is trying to find equilibrium.”

Stronger-than-expected earnings

Investor sentiment was also boosted by strong earnings reports from PayPal, CVS Health Corp and other companies.

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Business

ASX falls sharply, Wall Street sinks on US-China tension and economic uncertainty

Chess pieces are seen in front of displayed China's and U.S. flags.

Australian shares have dropped in morning trade, as ongoing economic uncertainty and flaring US-China tensions weighed on global market sentiment.

The arrival of US House of Representatives Speaker Nancy Pelosi in Taipei, despite warnings from Beijing, prompted China to launch war plans and buzz the Taiwan Strait in protest.

The ASX 200 dropped by a steeper-than-expected 0.9 per cent, to 6,938 points, by 10:35am AEST.

Nearly every sector traded lower, with utilities and materials suffering the biggest losses. Seven out of every 10 stocks were in the red.

Some of today’s worst performers include Champion Iron (-5.3pc), APA Group (-3.2pc), Seven Group (-3.2pc) and Eagers Automotive (-3.2pc).

On the flip side, some of the best performing stocks were Pinnacle Investment Management (+10.7pc), Block (+4.9pc), and Lynas Rare Earths (+4.6pc).

Aussie dollar sinks

The Australian dollar fell 0.4 per cent, to 68.9 US cents. That was on top of its sharp loss of 1.5 per cent overnight.

The sell-off began yesterday, when the Reserve Bank lifted its cash rate target by 0.5 percentage points, which takes the new rate to a six-year high of 1.85 per cent.

The weaker Australian dollar was also driven by a stronger US greenback as investors piled into currencies that are seen as “safe havens”.

In that regard, the Japanese yen jumped 0.9 per cent against the greenback, and was on track for a fifth day of gains, its longest winning streak since 2020.

“There is the uncertainty surrounding Pelosi’s trip to Taiwan and there’s additional data, regarding economic softness,” said Sam Stovall, chief investment strategist of CFRA Research.

“Regarding recession [in the United States]it’s not a question of ‘if’ but ‘when’ and how deep.”

‘An open question’ about further rate hikes

On Wall Street, the S&P 500 slipped by 0.7 per cent, to end the session at 4,091 points.

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Categories
Business

ASX set to fail, ahead of Reserve Bank’s likely interest rate hike of 0.5 per cent

A bank poster says "lock it in baby" advertising a 1.89pc fixed interest rate.

Australian shares are set to open lower, ahead of the Reserve Bank’s widely-expected interest rate hike this afternoon which will lead to another sharp rise in mortgage repayments.

ASX futures were down 0.3 per cent, to 6,880 points, by 8:25am AEST.

The Australian dollar was trading at a six-week high of 70.2 US cents, following a 0.6 per cent rise overnight.

According to many Australian economists, the most likely outcome of today’s RBA announcement will see the central bank lift it cash rate target by a larger-than-usual 0.5 percentage points.

This would take the new rate to 1.85 per cent, a big jump since the record low of 0.1 per cent in May. It would also be the highest cash rate since April 2016.

The central bank is expected to keep lifting rates aggressively over the coming months, as it desperately tries to bring inflation down from its 21-year high.

Effectively, it will do so by lifting rates to a level that makes consumers feel poorer so they visit the shops less, and spend more on their loan repayments.

House prices are also feeling the crunch. Since interest rates begin to rise sharply in May, property values ​​have dropped by 2 per cent — the fastest drop since the onset of the global financial crisis in 2008, according to figures from CoreLogic.

‘A lot of questions’ about the economic downturn

The local share market is also likely to follow a weak lead from Wall Street, which we see-sawed on Monday, local time, as crude oil prices plunged and the looming possibility of US recession curbed the appetite for taking risks.

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