The Monday Report – 14 August 2023

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            [6] => ((JBH))
            [7] => ((LLC))
            [8] => ((SUN))
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This story features STAR ENTERTAINMENT GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: SGR
The company is included in ALL-ORDS

By Greg Peel

Pokie Paradise

In a sluggish Friday on the ASX, all ASX200 sectors closed down bar three. There’s not a lot of optimism as the earnings season ramps up in earnest from today. Our futures were down -30 points on Saturday morning when the S&P500 lost only -0.1% on Friday night.

Winning sector of the day was discretionary (+0.8%), thanks to an 18% pop for Star Entertainment ((SGR)) after the NSW premier once again crumbled and relaxed tax rules on the casino, supposedly saving 5000 jobs but not livelihoods.

Healthcare managed to rise 0.3% and real estate 0.1%.

Energy was the worst performer (-1.9%) after investors decided strikes on the WA gas fields are not good news after all and Woodside Energy ((WDS)) fell -2.0%.

Technology was next worst on -0.6% as the Nasdaq continues to slide, while materials fell -0.5% as various commodity prices and miners battled it out.

Financials eased -0.1% after Philip Lowe waved farewell with a warning rates may yet need to rise further, and a metaphoric flip of the bird.

An 8.7% gain for AMP ((AMP)) on a results follow-through, after brokers had positive things to say for once, did not have much impact.

Outside the index, discretionary also looked good following a 13.3% response to Nick Scali’s ((NCK)) result. Seems the consumer is not quite dead yet.

News from China is that the ghosts of Evergrande still haunt; property giant Country Garden warned of a potential -US$7.6bn loss, sparking fears it may default on its loans.

It is clear that in terms of stimulating the economy, Beijing is caught between a rock and a hard place, with the property sector by far the biggest driver. Can’t just throw good money after bad.

Meanwhile, Hong Kong July foreclosures surged the most in more than five years, as higher rates hit homeowners’ ability to pay mortgages.

In further news, UBS has moved to kill off the Credit Suisse brand, after rescuing the failed investment bank earlier this year. It was a short and sweet history – Credit Suisse was founded in 1856.

Inflation Bumps

The US headline PPI rose 0.3% month on month in July when economists had forecast 0.2%. It was the biggest monthly move up since January, and took the annual rate to 0.8% from 0.2% in June.

The core PPI rose 0.2% when 0.1% was forecast, to an annual rate of 2.7%, unchanged from June. One year ago the core PPI was 5.8%.

Recalling that the US annual headline CPI rate rose to 3.2% in July from 3.0%, and that the core rate ticked down only to 4.7% from 4.8%, prior warnings that the “last mile” of disinflation would price a bumpy road, following swift falls from the dizzy heights earlier on, are proving accurate.

The US ten-year yield rose 9 points to 4.17%, helping the Nasdaq to a second weekly loss in a row – for the first time this year.

Rotation was again evident as the Dow closed up for the session, and for the week. Chevron was among the Dow winners (+2%), as it has enough fingers in global gas production pies to benefit from higher gas prices despite potential lost WA production.

Trading continues to be August-thin, and there is growing concern, in the wake of the latest inflation data, that oil prices (and gas prices) will continue to rise into “the fall”, which while positive for the energy sector would weigh on inflation fears, and thus rate hike fears, into the seasonally weakest month of September.

An interesting point about the PPI: Among the various price segments counted is portfolio manager performance fees. These have obviously been strong in the 2023 rally to date, so arguably the PPI is up because the stock market is up. But a strong PPI had the stock market down on Friday night.

A dog chasing its tail.

Commodities

Not much happening – the Country Garden news can’t be helpful.

The Aussie is down -0.2% at US$0.6500.

The SPI Overnight closed down -30 points or -0.4% on Saturday morning.

The Week Ahead

Earnings reports, and lots of them.

Today’s reporters include Bendigo & Adelaide Bank ((BEN)), Carsales ((CAR)), JB Hi-Fi ((JBH)) and Lendlease ((LLC)), among others.

Suncorp Group ((SUN)) goes ex-div.

In economic news, locally we’ll see the minutes of the August RBA meeting tomorrow, along with the June quarter wage price index, which will be critical to RBA policy, and July jobs numbers on Thursday, also critical.

China reports July industrial production, retail sales and fixed asset investment tomorrow.

Japan reports June quarter GDP.

The RBNZ holds a policy meeting.

The UK, EU and Japan report July inflation numbers.

The US reports July retail sales, and the minutes of the July Fed meeting are due.

For all company reporting dates, please refer to the FNArena Calendar (https://www.fnarena.com/index.php/financial-news/calendar/) or the Corporate Results Monitor (https://www.fnarena.com/index.php/reporting_season/). The latter summarises result responses from brokers following each day’s result releases.

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.

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