Aussie shares rebounded from four-week lows as investors embraced evidence that interest rate hikes are taking the heat out of a red-hot labour market.
The S&P/ASX 200 bounced 58 points or 0.79 per cent. The rally reversed much of a 78.7 per cent plunge yesterday, the index’s second-worst loss of the year.
Orora and Sonic Healthcare logged double-digit returns following trading updates. Newcrest sank after rejecting a takeover offer. AMP was punished for a sharp decline in funds under management.
What moved the market
A solid initial rally gained momentum after an unexpected rise in unemployment raised questions about the outlook for interest rates. The jobless rate jumped to a seasonally-adjusted 3.7 per cent in January from 3.5 per cent in December. Total employment decreased by 11,500 as a 31,800 lift in part-time work was outweighed by the loss of 43,300 full-time positions.
The decline sealed back-to-back monthly declines in employment for the first time since the Covid lockdowns of 2021. The cooldown in jobs followed eight straight interest rate hikes and preceded an eighth this month. The current cycle has lifted the cash rate target from 0.1 per cent to 3.35 per cent.
Stocks rose as traders bet the data will give the Reserve Bank reason to reassess its recent hawkish stance. The central bank has said labour markets would need to cool before inflation fell back within its target range.
“Despite the possibility of some seasonal effects in play over the holiday season, the underfire RBA will take some relief from the notion that the unemployment rate troughed in October at 3.4% and that there is further evidence of cooling in the labour market,” Tony Sycamore, market analyst at IG, said.
The market was already on the upswing as the big banks recovered some of yesterday’s heavy losses. A strong profit update from NAB appeared to help settle nerves.
Wall Street set the scene for today’s recovery after shrugging off a rebound in retail sales. The S&P 500 firmed 0.28 per cent despite the prospect that interest rates may go higher for longer to contain inflation.
NAB led a tentative rebound in some of the bank stocks, rising 0.66 per cent after reporting a $2.05 billion profit for the first quarter. The bank’s net interest margin expanded 12 basis points to 1.79 per cent as interest rates rose. Credit impairment charges climbed to $158 million from $114 million the previous quarter.
ANZ bounced 0.9 per cent. Westpac dropped 0.31 per cent. CBA declined another 1.46 per cent following yesterday’s poorly-received trading update.
An improved dividend and a 25.7 per cent lift in first-half profit carried Telstra up 1.93 per cent to a 13-month high. Shareholders will receive an interim dividend of 8.5 cents, a rise of 6.3 per cent. The telco reaffirmed its full-year guidance.
Packaging group Orora jumped 14.83 per cent from a near 52-week low after forecasting better full-year earnings this year. Double-digit earnings growth in North America helped first-half underlying earnings improve 8.5 per cent to 12.8 cents per share. The firm’s net profit lifted 7.8 per cent.
Sonic Healthcare gained 14.25 per cent after reporting a 9 per cent first-half increase in its base business while Covid revenues declined. Earnings were 40 per cent lower than a Covid-fuelled 1H22, but significantly stronger than before the pandemic. Earnings per share were 52 per cent higher than 1H20.
GrainCorp rose 2.98 per cent after outlining its expectations for full-year earnings. The agribusiness expects earnings to decline to $470-$530 million from a record $703 million in FY22. Net profit is anticipated to be $180-$220 million (FY22: $380 million).
An 11.2 per cent jump in half-year revenue to a record $1 billion lifted Bapcor 5.15 per cent. Net profit at the automotive parts and service business rose 2.3 per cent to $62 million.
Strong Black Friday and Christmas sales helped Super Retail Group raise first-half profit 30 per cent to $144 million. Sales increased 15 per cent to $1.96 billion. The share price popped 4.43 per cent.
Fallen fund manager Magellan bounced 6.35 per cent as turnaround plans helped offset news of a 52 per cent plunge in funds under management and a 67 per cent contraction in first-half profit. CEO and Chief Investment Officer David George said the firm had made good progress with a “well-defined and actionable five-year strategy”.
Self-storage landlord Abacus Property jumped 7.37 per cent after reaffirming full-year distribution guidance of 18.4 cents per share. Funds from operations rose 0.4 per cent in the first half from 1H22.
A guidance upgrade lifted Goodman Group. The industrial property giant rose 2.12 per cent after reporting an 11.5 per cent lift in half-year operating profit and raising its full-year operating earnings per security guidance to growth of 13.5 per cent. Previous guidance was for growth of 11 per cent.
Among other companies reporting today, Domain Holdings gained 3.92 per cent, Growthpoint Properties 5.21 per cent, IPH 4.06 per cent, ASX 0.33 per cent and AUB Group 4 per cent.
Newcrest dropped 1.69 per cent after rejecting a takeover offer from the world’s largest gold miner, Newmont. The board rejected the offer as representing insufficient value for shareholders. Newmont will be granted access to “limited, non-public information” to see if it can improve its offer of 0.38 per cent Newmont shares for each Newcrest share.
Newcrest also reaffirmed its full-year guidance after a first-half profit of $293 million. Shareholders will receive an interim dividend of 15 US cents and a special dividend of 20 US cents.
AMP sank 13.36 per cent as a return to profit was overshadowed by on-going outflows from its wealth management businesses. The firm swung to a statutory half-year profit of $387 million from a loss of $252 million in 1H22. Sellers were unsettled by $5.3 billion in net cash outflows from the Australian Wealth Management operation.
Whitehaven Coal dropped 2.81 per cent as hard-to-please investors punished the miner for not raising its dividend as much as expected. The company increased its dividend threefold to 32 cents a share following a record half-year net profit of $1.8 billion. Investors reportedly expected a payout nearer 44 cents.
New Hope sagged 3.66 per cent after reporting a 22.3 per cent decline in total coal sold last quarter from the prior corresponding period and a 7.2 per cent dip in production.
Evolution Mining fell 1.98 per cent after its half-year profit missed expectations. The gold miner reported an 11 per cent increase in statutory net profit to $101 million. Analysts had predicted a result nearer $131.8 million.
Among other companies reporting today, Origin Energy lost 3.23 per cent.
US futures firmed with Asian markets. S&P 500 futures improved eight points or almost 0.2 per cent.
The Asia Dow advanced 1.35 per cent, China’s Shanghai Composite 0.77 per cent, Hong Kong’s Hang Seng 2.31 per cent and Japan’s Nikkei 0.7 per cent.
Gold recouped almost a quarter of last night’s loss, rising US$4.70 or 0.25 per cent to US$1,850 an ounce.
Brent crude bounced 48 US cents or 0.56 per cent to US$85.86 a barrel, reversing last night’s 20 cent decline.
The dollar briefly swooned 0.5 per cent following the jobs data before reversing to a gain of 0.2 per cent at 69.21 US cents.