ASX Update: Flat mid-session as earnings flow

Aussie shares struggled for traction as investors digested a slew of corporate earnings and weighed mixed leads from the US.

An early 24-point advance for the S&P/ASX 200 faded to a skinny mid-session gain of four points or 0.05 per cent.

Well-received profit updates from Telstra, QBE, Downer EDI and AMP were offset by results from AGL, Goodman and Mirvac. Rio Tinto was the biggest drag on the index as the miner traded without the largest dividend payout in the company’s history.

What’s driving the market

The month-long reporting season hit its stride this session with updates from household names and index heavyweights. At half-time, the scores were tied despite winners outnumbering losers. The season will go up another notch next week.

The ASX 200 failed to pass the previous day’s peak for the first time in seven sessions. After six days of intraday records, the index topped out at 7608.6, six and a half points below yesterday’s top.

The market briefly turned negative after the ACT announced it will enter a snap seven-day lockdown from 5 pm tonight after a coronavirus case. The ASX 200 dipped three points into the red, before regaining its feet.

Mild declines on most Asian markets added to headwinds. The Asia Dow and Shanghai Composite dipped 0.09 per cent. Hong Kong’s Hang Seng eased 0.11 per cent. Japan’s Nikkei bucked the trend, rising 0.21 per cent.

Overnight, US stocks closed broadly higher amid signs inflationary pressures may be abating, easing pressure on the Federal Reserve to tighten monetary policy. The Dow and S&P 500 closed at records. The Nasdaq Composite dipped 0.16 per cent.

“Inflation has, at a minimum, paused,” Brad McMillan, chief investment officer at Commonwealth Financial Network, said. “For both the headline and core figures, the monthly and annual numbers were stable or down from last month. Based on that data, inflation is certainly not on an unstoppable increase.”

Going up

A strong return to profit lifted QBE to a pandemic-era high. The insurer jumped 8.21 per cent to a level last seen in March 2020 after swinging to a statutory half-year net profit of $441 million from a loss of $712 million in the prior period. The result reflected “a material turnaround in both underwriting and investment returns”.

Telstra rallied 3.52 per cent to an 18-month high after declaring it had reached a performance turning point. Net profit for the full year increased 3.4 per cent to $1.9 billion. CEO Andy Penn said second-half earnings were higher than the first half and the company expected mid to high single-digit growth this financial year. The company also announced a $1.35 billion share buyback.

Downer EDI also saw a sharp reversal in fortunes, declaring a full-year net profit of $181.6 million after losing $150.3 million last year. The engineering group restored its dividend and will pay shareholders 12 cents per share. Shares firmed 4.33 per cent.

AMP advanced 3.94 per cent as early signs of a turnaround at the troubled wealth manager helped shareholders overlook the absence of an interim dividend. Underlying earnings increased 57 per cent over the first half as market conditions improved. Statutory net profit fell to $146 million from $203 million during the prior corresponding period.

Transurban edged up for the first time in four sessions since warning of the growing impact of lockdowns on traffic volumes on its toll roads. The company gained 0.3 per cent on news a proposed toll road in the US had cleared a major regulatory hurdle.

A profit upgrade lifted Graincorp 14.63 per cent. The agribusiness said strong demand for Australian grain had delivered an “outstanding year” for the firm. The company raised its full-year earnings guidance to $310-$330 million from previous guidance of $255-$285 million.

“We’re seeing excellent demand for high quality Australian grain, particularly with recent weather related crop production challenges in the northern hemisphere, and July delivered our biggest month of contracted sales on record,” Managing Director & CEO Robert Spurway said.

Under-siege department store Myer surged 7.45 per cent to a 20-month high on news it expects to return a profit for the first time since 2017. The company expects a second-half net profit of $4-$7 million, based on unaudited preliminary results.

Going down

Industrial developer Goodman Group dropped 2.12 per cent after forecasting distributions will be stagnant this financial year at 30 cents per security as growth moderates. The company declared a full-year operating profit of $1.219 billion, up 15 per cent on last financial year. Earnings per security increased 14.1 per cent but growth was expected to slow to 10 per cent in FY22.

Rio Tinto fell $8.73 or 6.75 per cent as its shares traded without the right to a dividend payment of $7.60 per share.

AGL sank 4.34 per cent after declaring a statutory full-year loss of $2.058 billion. Underlying earnings sank 18 per cent. Underlying profit fell 34 per cent. Earnings and profit were also expected to contract further this year. The energy giant attributed its struggles to falling wholesale prices, legacy contracts and weak demand.

A 9 per cent decline in full-year operating profit helped pull Mirvac down 0.33 per cent. Revaluations in a red-hot property market lifted statutory profit 61 per cent. Earnings per share was ahead of guidance at 14 cents.

NAB eased 0.15 per cent after reporting a 10.3 per cent increase in cash earnings and a $1.65 billion net profit last quarter. Growth in mortgage and business lending contributed to the result.  

Xero dipped 2.09 per cent after declining to update guidance during this morning’s AGM. CEO Steve Vamos said operating expenses were expected to rise 2 per cent this year as the company integrates recent acquisitions.

CBA fell 2.26 per cent from yesterday’s post-earnings record. Other drags outside the earnings space included Afterpay -1.66 per cent, CSL -0.46 per cent and Westpac -0.16 per cent.

Other markets

US futures were little changed following last night’s gains. S&P 500 futures eased less than a point or 0.02 per cent.

Oil edged higher. Brent crude climbed four US cents or 0.06 per cent to US$71.48 a barrel.

Gold dipped US$1.60 or 0.09 per cent to US$1,751.70 an ounce.

The dollar was broadly steady at 73.66 US cents.