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Aussie shares rose for the first time in four sessions as corporate earnings and gains in the big banks helped offset declines in bulk metal producers.
The S&P/ASX 200 bounced 21 points or 0.28 per cent from a five-week low.
Afterpay owner Block, Brambles and Aristocrat Leisure rallied after trading updates. Mining heavyweights Rio Tinto and BHP were among the biggest drags.
What’s driving the market
The S&P 500’s first rise in five sessions provided a base for Australian gains at the end of a losing week. The broadest of Wall Street’s major indices bounced 0.53 per cent after data suggested the economy was not running as hot at the end of last year as previously feared.
“Wall Street reflected confusion among traders in Thursday trading, with a fall in jobless claims pointing toward jobs market’s strength, while a downward revision in US fourth quarter GDP reading shows the economy was not as strong as feared at the end of the year,” Kunal Sawhney, CEO of research group Kalkine, said.
Despite this morning’s rise, the ASX 200 remained on track for a third straight losing week. The exuberance of January has given way to a more cautious mood this month as central banks here and in the US show no sign of pausing the current pace of interest rate increases.
“No matter what, more rate hikes in Australia and the US are coming over the next few months,” Sawhney said.
“If the fear that higher borrowing rates would show their real impact on the economy in the second half of 2023 comes true, then it could supersede other forces like the jobs market and wages in deciding the trajectory of Aussie and global markets.”
Westpac this morning became the latest of the big banks to raise its rates forecast. The bank increased its “terminal rate” or forecast peak of the current cycle from 3.85 per cent to 4.1 per cent. The change implies three more quarter-point hikes.
“The [RBA] Board has adopted a more hawkish approach since the release of the December quarter inflation report,” the bank’s chief economist, Bill Evans, said.
“The RBA seems locked in to further hikes in the cash rate in both March and April. The revised forecasts and March quarter inflation report are likely to require a further hike in May,” he added.
Going up
Afterpay owner Block jumped 6.64 per cent after a profit beat helped offset an earnings miss. The payments company reported a 40 per cent increase in fourth-quarter gross profit to US$1.66 billion. Earnings came in short of consensus expectations at 22 cents per share, versus an expected 30 cps.
A guidance upgrade lifted transport logistics business Brambles 8.08 per cent. A strong first half prompted the company to raise its full-year revenue growth forecast to 12-14 per cent and its profit growth forecast to 15-18 per cent. First-half profit climbed 20 per cent on a constant currency basis to US$331.1 million.
Aristocrat Leisure firmed 2.15 per cent after CEO Trevor Croker reaffirmed full-year guidance at this morning’s AGM. The pokie-maker expects net profit growth over the full year, underpinned by its gaming operations.
Link Administration tacked on 2.33 per cent after beating its first-half earnings guidance. At $80.2 million, operating earnings were just ahead of guidance of $75-$80 million. Group revenues improved 1.9 per cent in constant currency terms.
Pilbara Minerals rose 4.69 per cent after reporting a staggering 989 per cent lift in first-half profits amid unprecedented demand for lithium. Sales increased by 305 per cent from the prior corresponding period. Revenues jumped 647 per cent and earnings by 1,091 per cent. Statutory net profit after tax soared from $114 million to $1.24 billion.
Allkem saw a similar explosion in first-half net profit from US$12.7 million to US$219.2 million. Revenues were a record US$557.9 million. The share price firmed 4.14 per cent.
Beleaguered casino group Star Entertainment bounced 6.78 per cent after raising capital to shore up its balance sheet. The company raised $595 million from institutional investors. The company yesterday posted a $1.3 billion loss for the last half.
Bega Cheese reversed much of yesterday’s post-earnings plunge with a bounce of 6.93 per cent.
The big four high-street banks rallied between 0.07 and 1.03 per cent.
Going down
Payments firm EML dived 9.91 per cent after its Irish subsidiary was warned it was not doing enough to meet Irish regulatory requirements. The Central Bank of Ireland said PFS Card Services Ireland had made only limited progress in fixing deficiencies in its anti-money laundering and counter-terrorist financing controls. The central bank was “minded” to impose a freeze on payments growth.
Iron ore producers BHP and Rio Tinto retreated in the wake of price falls in Chinese ore after the exchange operator imposed a trading cap to curb speculation. Rio Tinto shed 2.6 per cent. BHP lost 1.09 per cent.
Several companies traded ex-dividend. Deterra dropped 2.58 per cent, Newcrest 2.5 per cent, GUD 0.79 per cent and BlueScope Steel 1.08 per cent.
Among other companies reporting earnings, Jumbo Interactive fell 3.57 per cent, Prospa 2.73 per cent and Universal Store 2.09 per cent. Austal inched up 0.27 per cent.
Other markets
Japan’s Nikkei index rallied 1.28 per cent as trade resumed after yesterday’s public holiday. The Asia Dow dropped 0.25 per cent, China’s Shanghai Composite 0.01 per cent and Hong Kong’s Hang Seng 0.63 per cent.
US futures were little changed ahead of tonight’s inflation data. S&P 500 futures edged up one point or 0.02 per cent.
Oil built on its first advance in seven sessions. Brent crude climbed 64 US cents or 0.8 per cent to US$82.59 a barrel.
Gold bounced US$6.20 or 0.3 per cent off a near two-month low to US$1,832.60 an ounce.
The dollar was flat at 68.08 US cents.
