The Overnight Report: Shop Till You Drop

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            [1] => ((CTD))
            [2] => ((TWE))
            [3] => ((WES))
            [4] => ((GUD))
            [5] => ((COH))
            [6] => ((SGR))
            [7] => ((BRN))
            [8] => ((NAB))
            [9] => ((DHG))
            [10] => ((EVN))
            [11] => ((GMG))
            [12] => ((NCM))
            [13] => ((ORG))
            [14] => ((S32))
            [15] => ((TLS))
            [16] => ((WHC))
            [17] => ((GNC))
            [18] => ((IPL))
            [19] => ((IAG))
            [20] => ((SCG))
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            [4] => GUD
            [5] => COH
            [6] => SGR
            [7] => BRN
            [8] => NAB
            [9] => DHG
            [10] => EVN
            [11] => GMG
            [12] => NCM
            [13] => ORG
            [14] => S32
            [15] => TLS
            [16] => WHC
            [17] => GNC
            [18] => IPL
            [19] => IAG
            [20] => SCG
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This story features COMMONWEALTH BANK OF AUSTRALIA, and other companies.
For more info SHARE ANALYSIS: CBA
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Take the Money and Run

While Dr Lowe was being stretched on the rack and stuck with hot pokers in Canberra, Commonwealth Bank ((CBA)) announced $5bn in first half profit, beating forecasts, an 18 point increase in net interest margin to 210 basis points, and a 20% increase in dividend. The stock fell -5.7%.

The bank also revealed an increase in operating expenses and loan impairments. Analysts have been warning for some time now the banks will post their last hurrah results for their first halves, exploiting peak margins, before competition heats up on the deposit side and Australian borrowers start hitting the skids.

There will be pain, said Dr Lowe.

As for deposits, the Treasurer has ordered the ACCC to look into why the banks are so quick to put up loan rates on RBA hikes, and so slow to raise rates on savings. Next week the Commission will investigate why the sun comes up each day.

Pressure on deposit rates means pressure on margins, and already the banks are becoming competitive on the deposit front. A 20% increase in CBA dividend? You can keep it. We’re out of here.

And out of all the other banks, not waiting for results in May. The financials sector fell -3.4% yesterday, which is why the ASX200 was down -1.0%. We haven’t seen that sort of move since the Royal Commission.

Take out the banks and it was a fairly benign session sector-wise, featuring mixed and modest moves, although as usual result season brought some sharp individual stock moves up and down.

Beating CBA on share price fall on result were Corporate Travel Management ((CTD)), down -8.7% and Treasury Wine Estates ((TWE)), down -6.9%. Beyond the banks, consumer discretionary was the worst performing sector (-1.4%), with Wesfarmers’ ((WES)) result hardly moving the dial.

Starring on the plus-side were GUD Holdings ((GUD)), up 8.1% and Cochlear ((COH)), up 7.7%.

Outside of results, Star Entertainment ((SGR)) found some punters and bounced back 14.4%, while Brainchip’s ((BRN)) -13.6% plunge prompted a Pauline from ASIC ("please explain") but management had no idea.

Well, if we can’t buy the banks anymore, that means we have to buy resources.

The daily coin toss on thermal coal prices came up heads yesterday so the coal miners rallied again, while the gas companies faded and energy fell -0.9%. The big miners did little and nor did gold miners, but they will today after another fall in gold overnight. Materials closed down -0.1%.

Analysts have warned the halcyon days for the banks will soon be over, and also that the days of super-dividends from the resource companies are now behind us as well.

Retail Therapy

The US consumer is alive and well and eager to spend, it would appear, thanks to a strong labour market and rising wages. US retail sales rose 3.0% in January – the biggest increase in nearly two years – when economists had forecast 1.9%.

Sales rose in every single major category, led by department stores. One category economists watch closely is bars and restaurants, being the only service sector in the retail report. Restaurant sales jumped 7.2% last month after falling slightly in the last two months of 2022.

Once again, Wall Street was not sure what to do with the information. Up until the last hour, the S&P500 was flat.

The sales number only serves to highlight the conundrum US investors find themselves in. In the last couple of weeks they’ve seen a super-strong jobs report, a hot inflation number and now a surge in retail sales. All of the above points to the Fed remaining resolute in its monetary tightening, and diminishing any notion of a near-term pause, let alone a pivot.

All of the above also points to a healthy US economy. Could the Fed continue to tighten and still bring the economy in for a soft landing? The fact Wall Street has held on to all its January gains would suggest this is the belief.

Not all agree, of course. But looking at it the other way, if the Fed goes too far and tips the US into recession, it will be forced to cut rates, and that would be a good thing. Powell himself has noted he’d rather go too far and have to come back than to not go far enough, and lose control.

Tonight brings the January PPI. We’ll see what Wall Street makes of that one.

Commodities

Where is China? The US dollar jumped 0.6% on the retail sales numbers and bond yields ticked up again, hitting base metal and gold prices.

The Aussie has dropped -1.3% to US$0.6899.

Today

The SPI Overnight closed up 36 points or 0.5%. A bit harsh on the banks yesterday? CBA has a nice dividend on offer.

We’ll see January jobs numbers today.

Along with the PPI, the US will see housing starts and the Philly Fed index.

National Bank ((NAB)) will provide a quarterly update today. Tough act to follow.

It’s the biggest day yet in the reporting season. Results are due from Domain Group ((DHG)), Evolution Mining ((EVN)), Goodman Group ((GMG)), Newcrest Mining ((NCM)), Origin Energy ((ORG)), South32 ((S32)), Telstra ((TLS)) and Whitehaven Coal ((WHC)), just to name a few.

GrainCorp ((GNC)) and Incitec Pivot ((IPL)) hold their AGMs.

Insurance Australia Group ((IAG)) and Scentre Group ((SCG)) go ex.

For a calendar of earnings result releases and a summary of earnings results to date, refer to FNArena's Corporate Results Monitor (https://www.fnarena.com/index.php/reporting_season/)

The Australian share market over the past thirty days…

For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's – see disclaimer on the website)

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