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The S&P/ASX 200 struggled for traction as two of the index’s three largest companies declined on the busiest day of earnings season so far.
The Australian benchmark seesawed before reaching mid-session three points or 0.05 per cent ahead.
Healthcare giant CSL fell after reporting a 6 per cent decline in full-year profit. Commonwealth Bank weighed as its shares traded ex-dividend.
Gains in consumer and mining stocks kept the index near break-even.
What’s driving the market
Corporate earnings provided much of the direction as the full-year reporting season hit top gear. Misses appeared to narrowly outweigh hits as the market thumbed down updates from CSL, Santos, Magellan and Domain Holdings, and applauded results from Brambles, Super Retail Group and Fletcher Building. More below.
The market is on a four-week winning streak as investors take advantage of price falls through the first half of the year.
“A lot of bad news – from recession to weak corporate earnings – was factored into the markets in June, which saw a massive correction. But when things turned out to be not as bad as expected, value buying emerged in beaten-down stocks/sectors, especially after the latest government report on [US] consumer prices that showed inflation stalled from June to July,” Kunal Sawhney, chief executive of research group Kalkine, said.
However, markets now face overhead technical resistance. Both the S&P 500 and ASX 200 are close to their 200-day moving averages.
“The ASX 200 index faces major resistance at 7,161 level, where the 200-day moving average is placed. Although the short-term trend remains bullish, a continuation of the trend will depend on whether the index can cross the 200-day moving average,” Sawhney said.
The index reversed a morning decline after data showed wages did not grow as fast as expected last quarter, easing pressure on the RBA to hike rates.
The Wage Price Index grew 0.7 per cent in the three months to the end of June, missing expectations for an increase of 0.8 per cent. Annual growth of 2.6 per cent was the strongest in eight years, but also just below consensus.
“After three quarters of consistent wage growth, driven mostly by wage rises across the private sector, the annual rate of growth was 2.6 per cent. This is the highest annual rate of wages growth since September 2014,” Michelle Marquardt, head of Prices Statistics at the ABS, said.
The Dow and S&P 500 rallied overnight as robust earnings from retailers soothed concerns about the demand impact of higher prices. The Dow put on 0.71 per cent. The S&P 500 added 0.19 per cent.
Going up
Supply-chain logistics specialist Brambles hit a 12-month high after beating guidance. The share price jumped 4.7 per cent on news underlying profit increased 10 per cent to US$930 million. Sales revenues expanded 9 per cent.
Record full-year sales boosted Super Retail Group 7.78 per cent. The automotive parts retailer reported a 44 per cent increase in online sales.
Bapcor edged up 2.22 per cent after hitting its full-year profit guidance. The Autobarn owner reported a record statutory net profit of $125.8 million.
A 42 per cent increase in full-year net profit helped lift Fletcher Building 3.75 per cent.
Takeover target Nearmap gained 3.64 per cent after reporting year-on-year growth in contracts of 25 per cent.
Aside from companies reporting, the index’s best performers were retailer City Chic Collective +5.15 per cent, fund manager Challenger +4.53 per cent and plumbing supplies manufacturer Reliance Worldwide +3.22 per cent.
At the heavyweight end, Wesfarmers gained 2.76 per cent, Goodman Group 1.95 per cent and Woolworths 1.66 per cent.
Going down
CSL dropped 1.66 per cent after weak plasma collections during the pandemic and higher costs dented profits. Full-year net profit declined 6 per cent to $2.255 billion, near the top end of guidance. Revenues increased 3 per cent.
The biotech expects profits to grow this fiscal year as pandemic headwinds subside and plasma collections improve. Costs will remain elevated.
Commonwealth Bank dropped 1.55 per cent as its shares traded without the right to the latest dividend.
A 300 per cent bounce in half-year profits failed to keep Santos in positive territory. The energy giant’s shares slid 2.33 per cent. Underlying profit expanded to US$1.267 billion as oil and gas prices rocketed..
Corporate Travel Management sank 2.47 per cent despite swinging back into profit. Full-year net profit improved to $3.1 million from a loss of $55.4 million in FY21. Revenues more than doubled to $377.4 million as business travel picked up.
A 16.5 per cent decline in full-year profit to $15.6 million weighed on Downer EDI. Shares in the engineering group dropped 6.15 per cent.
Domain Holdings fell 4.94 per cent after warning costs will increase this fiscal year while margins remain steady. The property listings group reported a full-year after-tax profit of $35.1 million.
Online marketplace Redbubble plunged 38.8 per cent after swinging to a full-year loss as a sales boost from masks wore off. The company reported a full-year loss of $24.6 million, down from a profit of $31.2 million in FY21.
Investment manager Magellan fell 7.37 per cent as a 9 per cent decline in funds under management overshadowed a 44 per cent jump in statutory net profit. Adjusted net profit declined 3 per cent.
Other markets
A broadly positive morning on Asian markets saw the Asia Dow gain 0.55 per cent, Hong Kong’s Hang Seng 0.19 per cent and Japan’s Nikkei 0.78 per cent. China’s Shanghai Composite shed 0.23 per cent.
S&P 500 futures traded unchanged.
Oil clawed back a fraction of last night’s 2.9 per cent loss. Brent crude bounced 22 US cents or 0.24 per cent to US$92.56 a barrel.
Gold bounced US$1.20 or 0.07 per cent to US$1,790.70 an ounce.
The dollar drifted 0.13 per cent lower to 70.1 US cents.
