Join our daily newsletter At The Bell to receive exclusive market insights
The share market pushed towards eight-week highs as a huge week of corporate earnings got underway.
The S&P/ASX 200 rallied 23 points or 0.33 per cent by mid-session.
A takeover offer for aerial mapping group Nearmap and well-received trading updates from BlueScope Steel, GPT Group and Carsales.com offset negative reactions to updates from Beach Energy, JB Hi-Fi, GWA Group, GUD and Bendigo & Adelaide Bank.
What’s driving the market
Positive leads from Wall Street helped the ASX recoup most of Friday’s loss despite a soft economic update from trading partner China. The ASX 200 was just below Thursday’s two-month closing high around lunchtime.
The S&P 500 jumped 1.73 per cent on Friday to extend its weekly advance to 3.25 per cent. Last week’s advance was the US benchmark’s fourth in a row, the longest run of weekly gains since November.
The global recovery in equities since the June lows has surprised many investors who anticipated prolonged weakness as rising rates and slowing growth pressure earnings. At least some of the gains across the last eight weeks have been driven by short-covering and institutional investors scrambling to rebuild their portfolios.
“Investors clearly were underweight equities going into June and were surprised by a trio of events, including ok big tech earnings, [Federal Reserve Chair Jerome] Powell stating the Fed is at neutral, and signs of inflation peaking. Positioning might still be light (adding to the potential for a further squeeze higher in thin summer holiday trade), but on a macro view there are still signs of softness in the US economy,” NAB’s Director of Economics, Tapas Strickland, said.
Sentiment this morning was briefly boosted by an unexpected interest rate cut in China. The People’s Bank of China dropped the rate on one-year policy loans by 10 basis points to 2.75 per cent to help cushion the economy against a property slump and sporadic Covid lockdowns.
The reason for the rate cut became evident shortly after when the National Bureau of Statistics announced a slew of weak economic data. Industrial production expanded just 3.8 per cent last month year on year, down from 3.9 per cent in June and well short of the market consensus.
Retail sales grew by 2.7 per cent and fixed asset investments by 5.7 per cent. Both figures also fell short of expectations. A decline in house prices accelerated.
Back home, full-year earnings are likely to dictate trade this week. A heavy schedule includes updates from index heavyweights BHP and CSL, as well as Santos, Transurban and Newcrest. Roughly a third of the ASX 200 by market capitalisation is due to report this week.
Going up
Aerial mapping group Nearmap jumped 24.5 per cent to $1.88 following a takeover offer at $2.10 per share. Software investment firm Thoma Bravo pitched the “non-binding indication of interest”, which values Nearmap at around $1.055 billion. The board granted the private equity firm the opportunity to carry out due diligence.
Steelmaker BlueScope climbed 5.27 per cent after more than doubling its full-year profit. The firm reported record underlying earnings of $3.79 billion and a net profit of $2.81 billion, up 135 per cent on FY21. The firm will buy back an additional $500 million in shares over the next 12 months.
GPT Group rallied 5.81 per cent as investors looked past a decline in interim distribution. Shareholders will receive 12.7 cents per security, down from 13.3 cents in 2021. CEO Bob Johnston said the result was “solid” in the face of high inflation and rising interest rates.
“Notwithstanding the effects of COVID-19, our Retail portfolio continued to perform well with retail sales recovering to levels above 2019 pre-pandemic levels across most of our assets. Strong leasing outcomes have resulted in retaining high portfolio occupancy and leasing spreads continued to improve,” Johnston said.
A 23 per cent lift in full-year profit lifted online classifieds business Carsales.com 4.45 per cent to a seven-month high. The result was boosted by the acquisition of the 51 per cent of US platform Trader Interactive that the firm did not already own.
Takeover target OZ Minerals edged up 0.04 per cent after clearing all the regulatory hurdles to develop its West Musgrave project in WA.
The major bulk metal miners pared their gains following this morning’s soft Chinese data. BHP trimmed its advance to 0.93 per cent. Rio Tinto was lately up 0.39 per cent and Fortescue Metals 1.45 per cent.
Going down
Beach Energy slumped 13.24 per cent after full-year profit fell short of expectations and production costs for the fiscal year ahead increased. Underlying net profit improved 39 per cent to $504 million, shy of the $546 million anticipated by the market. Operating costs were expected to increase this year to $12-$13 per boe from $11.74 per boe in FY22.
A decline in profit and contraction in margins helped pull Bendigo & Adelaide Bank down 5.15 per cent. Full-year net profit fell 7.7 per cent to $488.1 million. Net interest margin tightened 21 basis points to 1.74 per cent.
Investors sniffed at a 7.7 per cent increase in full-year net profit at JB Hi-Fi and news of a positive start to FY23. The company grew sales by 3.5 per cent last year to $9.2 billion and increased earnings per share by 8.8 per cent to 479.5 cents per share. Australian sales improved 9.7 per cent last month. The share price retreated 1.3 per cent.
Automotive and pool parts supplier GUD eased 0.56 per cent despite meeting revised full-year earnings guidance. Underlying earnings improved 47.1 per cent to $149.5 million. Underlying profit increased 38.9 per cent to $88.9 million.
Bathroom fixtures supplier GWA Group slipped 0.46 per cent. The firm increased full-year sales by 3.2 per cent to $418.7 million. Normalised net profit expanded 11.7 per cent to $47.3 million.
Other markets
Asian markets were mixed in the wake of this morning’s Chinese economic data and rate cut. The Shanghai Composite dropped 0.2 per cent. Hong Kong’s Hang Seng shed 0.7 per cent. The Asia Dow held on to a gain of 0.86 per cent. Japan’s Nikkei advanced 0.97 per cent.
US futures added to losses after the noon AEST Chinese update. S&P 500 futures sank 12 points or 0.27 per cent.
Oil added to Friday’s loss. Brent crude fell 65 US cents or 0.66 per cent to US$97.50 a barrel.
Gold dropped US$4.20 or 0.2 per cent to US$1,811.30 an ounce.
The dollar retreated 0.24 per cent to 70.98 US cents.
