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The share market edged to a ten-week high before losing momentum as declines in banks and defensive assets largely offset gains in resource stocks.
The S&P/ASX 200 trimmed a 25-point mid-morning advance to seven points or 0.1 per cent at the halfway mark.
Energy stocks rallied after crude oil logged back-to-back gains. A profit beat lifted gold and copper miner Newcrest. AGL Energy, Stockland and Inghams were among the heaviest weights after reporting.
What’s driving the market
Commodity producers provided most of the momentum following lukewarm leads from Wall Street. The S&P 500 edged up 0.23 per cent overnight as hawkish comments from Federal Reserve officials kept gains in check.
“The market is doing a little consolidating this week, a little flip-flopping,” Frank Gretz, technical analyst at Wellington Shields, told CNBC. “I think this is still a healthy market,” he added.
Equity markets have recovered strongly since mid-June as investors picked up stocks at the lowest prices since the depths of the pandemic. However, rising valuations threaten to stall the recovery.
“The fact that investors want to buy quality stocks at cheap valuations drove the market rebound since mid-June. But after this rally, valuation comfort is no more there. So, from here on, the market direction will depend on how the economy is shaping up,” Kunal Sawhney, chief executive of research group Kalkine, said.
“One should not forget the fact that strong earnings reported by companies such as BHP were because of favourable economic conditions, which may not be there in the coming quarters amid a slowdown in global consumption.”
This month’s reporting season has done little to slow the ASX rally despite cautious outlooks from many companies. The ASX 200 was this morning on track for a fifth consecutive weekly advance for the first time since June 2021.
Going up
Coal miners shone for a second day as prices out of Newcastle continued to improve. Whitehaven rallied 7.65 per cent to an all-time high. New Hope advanced 6.33 per cent to a level last seen in 2012. Coronado gained 4.99 per cent.
Energy producers jumped after two nights of gains in Brent crude sharpened hopes the worst of the downturn over the last week has passed. Santos popped 6.01 per cent. Woodside Energy put on 4.93 per cent.
Gold and copper miner Newcrest rallied 4.66 per cent after beating profit expectations. While full-year profit declined 25 per cent to $872 million, the result was ahead of the $843.5 million anticipated by the market. Buyers were encourage by news production costs trended lower in the second half.
“Works have continued to advance across our global organic growth portfolio, with Cadia, Red Chris, Havieron and Lihir all expected to reach key study milestones throughout FY23. Our track record of exploration success has also continued at Brucejack, Red Chris and Havieron, with strong drilling results supporting our view of significant resource growth potential,” Managing Director and CEO Sandeep Biswas said.
Gold Road Resources bounced 1.31 per cent after increasing its stake in rival De Grey to 19.99 per cent but downplaying takeover speculation.
“At this stage, this shareholding is seen as a long-term investment and Gold Road does not intend to make a takeover bid or other offer for DEG, but Gold Road reserves its right to do so and to make further investments in DEG at any time,” the company said. De Grey shares eased 2.25 per cent.
Record full-year sales revenues of $1.641 billion boosted Cochlear 3.31 per cent. The acoustic implant specialist reported an 11 per cent dip in statutory net profit, but a ten per cent increase in underlying profit.
Latitude firmed 0.63 per cent after beating first-half profit expectations. The lender reported a cash profit of $93 million, ahead of the consensus forecast of $90 million but down 11 per cent from 1H21. Managing Director and CEO Ahmed Fahour announced plans to retire by the end of August next year.
A positive trading update lifted footwear retailer Accent Group 8.31 per cent. The owner of The Athlete’s Foot and Glue Store brands said sales rose 48.9 per cent in the first seven weeks of FY23. The company reported a net profit of $31.5 million for FY22.
Waste manager Cleanaway will tap shareholders to fund the acquisition of a composting business. Trade was halted while the firm raises $350 million from institutional investors and $50 million from retail shareholders to buy Sydney-based Global Renewables Holdings.
Going down
AGL Energy dropped 4.23 per cent after reporting a 58 per cent slump in full-year underlying profit amid “challenging” energy market conditions. Underlying earnings declined 27 per cent to $1.218 billion. A failed demerger plan knocked $125 million off profits.
A revenue warning pulled Fisher & Paykel Healthcare down 4.86 per cent. The New Zealand-based medical device manufacturer expects first-half revenues to fall to NZ$670 million from NZ$900 million in 1HFY22. Sales have deteriorated this fiscal year as the demand bump from the pandemic wears off.
TPG Telecom dived 12.01 per cent following a 5.3 per cent downturn in half-year earnings, due to restructuring costs, higher NBN wholesale charges and rising prices for handsets. Revenue ticked up 0.7 per cent to $2.19 billion.
Poultry producer Inghams slumped 9.43 per cent after reporting a 57.9 per cent drop in full-year net profit. Shareholders will receive a smaller dividend of 7 cents, down from 9.5 cents in FY21.
Stockland eased 2.23 per cent despite increasing full-year profit by 25 per cent to $1.381 billion. Funds from operations grew 8 per cent. Net tangible assets increased 8.3 per cent.
APA Group dropped 1.35 per cent after identifying underpayments to employees over the last seven years. The energy infrastructure group will take a provision of $32 million in its full-year accounts for remediation costs.
Other markets
A trendless session on Asian markets saw Hong Kong’s Hang Seng up 0.39 per cent and Japan’s Nikkei ahead 0.07 per cent. The Asia Dow dropped 0.41 per cent. China’s Shanghai Composite shed 0.16 per cent.
S&P 500 futures faded five points or 0.12 per cent.
Oil pared a two-session rebound. Brent crude retreated 20 US cents or 0.2 per cent to US$96.39 a barrel.
Gold dipped US$1.90 or 0.1 per cent to US$1,769.30 an ounce.
The dollar was steady at 69.12 US cents.
